IRS Further Delays W-2 Reporting Requirement for Small Employers

04.20.2011 - National Healthcare Reform

New guidance released by the Internal Revenue Service (IRS) provides small employers with further relief from the Form W-2 health care value reporting requirement under the health reform law.

The Internal Revenue Service (IRS) issued to employers on March 29, 2011 interim guidance - IRS Notice 2011-28 - related to the W-2 information reporting requirement included in the Patient Protection & Affordable Care Act (ACA).

A provision of the ACA requires employers of all sizes to annually report the aggregate value of each employee's employer-sponsored health insurance coverage on their Form W-2. IRS Notice 2010-69, issued in fall 2010, made this requirement optional for all employers for tax year 2011 (that is, W-2 forms generally issued to employees in January 2012).

In this round of guidance, further transition relief was provided for small employers, defined for the purposes of this provision of the health reform law as those filing fewer than 250 W-2 forms in the previous tax year. The IRS has made this reporting requirement optional for tax year 2012 (that is, W-2 forms generally issued to employees in January 2013) for said employers and is continuing this optional treatment until further guidance is issued.

Likely because of some misconception by the public, this guidance stresses that the reporting requirement to employees is for informational purposes only and does not change the favorable tax treatment of employer-sponsored health benefits. Indeed, health care coverage offered through an employer remains tax free.

Notice 2011-28 also provides guidance for those employers that are subject to the reporting requirement for tax year 2012 as well as those that choose to voluntarily comply in either tax years 2011 or 2012. Also included is information on how to report, how to determine the aggregate cost of coverage, and what types of coverage to include in the valuation process.