For those small businesses who are worried about how they will track and report health insurance benefits on Form W-2, I have some good news. At least for most of you, and at least for now. That is, for tax year 2012 (W-2s filed in January of 2013). But after that, stay tuned to what the IRS does next.
For the time being, employers who have fewer than 250 W-2s during 2011, do not need to report health insurance coverage on 2012 Form W-2 that will be due in January 2013.
IRS published “Notice 1011-28” regarding this topic.
Starting in tax year 2011, the Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan. To allow employers more time to update their payroll systems, Notice 2010-69, issued last fall, made this requirement optional for all employers in 2011. IRS Notice 2011-28 provided further relief by making this requirement optional for smaller employers in calendar-year 2012. Notice 2011-28 also provides guidance for employers that are subject to this requirement for the 2012 Forms W-2 and those that choose to voluntarily comply with it for either 2011 or 2012.
The following frequently asked questions provide information for employers on reporting the value of the health insurance coverage, including information on transitional relief for 2012, how to report, what coverage to include and how to determine the cost of the coverage.
4. What transition relief is being provided by Notice 2011-28? To which employers and types of coverage does it apply and how long does it last?
A. For certain employers and with respect to certain types of coverage listed below, the requirement to report the value of coverage will not apply for the 2012 Forms W-2 (the forms required for the calendar year 2012 that employers generally are required to provide employees in January 2013) and will not apply for future calendar years until the IRS publishes guidance giving at least six months of advance notice of any change to the transition relief.
The transition relief applies to the following:
(1) employers filing fewer than 250 Forms W-2 for the previous calendar year (for example, employers filing fewer than 250 2011 Forms W-2 (meaning Form W-2s for the calendar year 2011, which generally are filed with the SSA in early 2012) will not be required to report the cost of coverage on the 2012 Forms W-2 (which generally are filed with the SSA in early 2013);
There are several other items in the notice, so for the full story, check the IRS web site.
Why Must We Do This at All?!?!?!
When you consider the size and scope of the Healthcare Bill, it’s no wonder that there are new requirements like this for employers.
This one frustrates me, though, because it seems like such a fools errand. Essentially, the new requirement makes every employer in the US implement a new tracking and reporting system for company paid health insurance benefits. My question is, to what end? The benefits are not taxable to employees, so why do they need to be on a tax return source document like the W-2? Can’t they get the information in some other way?
It’s not that this new requirement is so hard to comply with – most payroll services and software companies have already (or will soon) implement the tracking systems. However, what seems easy on the surface still requires people to:
- Learn about the new requirement.
- Set up their systems to accurately track the benefits.
- Prepare the forms and reconcile them with the accounting records.
With employers already scrambling in this economy, this adds up to quite a headache.
Consider the costs of complying with this. When you add up all of the software that needs to be upgraded, all of the education of employers and payroll services, and all of the costs of dealing with problems when the reports come out wrong, this “simple” new requirement is a huge new cost burden on employers.
I suppose I should be glad. It provides even more opportunities for payroll services, bookkeepers, consultants, and accounting firms to bill more hours. , but trust me, none of us want more of this type of work. The more of “this type of work” we’re forced to do, the less we can help clients with what they REALLY want from us, which is help on building and managing their businesses. While we’re all chasing our tails, the growth of our economy is hampered even further.
Marilyn Bell contributed to this post.