by Nick Groen
14. November 2011 08:20
By: Tom Mitchell
With the passing of the Patient Protection and Affordable Care Act of 2010 (A.K.A.“Obamacare”), many employers are concerned about the new Form W-2 health care coverage cost reporting requirements. The following is a summary of the major points and provisions concerning those reporting requirements.
The amounts required to be reported will continue to be tax free. Because the coverage costs are not taxable, the costs should be reported on Box 12 of Form W-2 using code “DD.” This reported amount will not affect boxes 1 or 2 and are reported for informational purposes only. It is also important to note that these costs are not required to be reported on Form W-3.
This reporting requirement is optional for all employers for the 2011 tax reporting period. For the 2012 tax period, employers who filed 250 or more W-2 Forms in 2011 will be required to report the health care coverage costs on the employee Form W-2s. Employers who filed fewer than 250 Form W-2s in 2011 qualify for transitional relief and do not have to report coverage amounts on their 2012 Form W-2s. The relief for taxpayers that qualify for transitional relief is only temporary, and can change when the IRS publishes further guidance.
The next logical question is what costs are required to be reported for employers who do not qualify for transitional relief? All aggregate reportable costs of coverage and any employer-sponsored coverage except Archer Medical Savings Accounts, Health Savings Accounts, and Salary reductions for flexible spending arrangements should be included if the amounts are paid by the employer and/or the employee. Certain costs are excluded including: coverage for long-term care, Health Insurance Portability and Accountability Act (HIPPA) “excepted benefits”, dental and vision coverage, and specialized coverage if paid on an “after tax” basis.
Form more information on employer reporting requirements of health care coverage on Form W-2 please see the following sources: Notice 2010-69 or Notice 2011-28 which can easily be found at www.irs.gov.