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The IRS has updated its online FAQs and posted a chart illustrating the types of health care coverage that employers must report on Form W-2 under the Patient Protection and Affordable Care Act (PPACA).

New Information on Reporting Health Care Benefits

  • 5/16/2012

New Information on Reporting Health Care Benefits

The IRS has updated its online FAQs and posted a chart illustrating the types of health care coverage that employers must report on Form W-2 under the Patient Protection and Affordable Care Act (PPACA). Some types of coverage must be reported, while other types are optional.

Background

The PPACA generally requires employers to report the cost of employer-provided health coverage on Forms W-2, starting with Forms W-2 issued in 2012 for the 2011 tax year. In Notice 2010-69, the IRS made reporting of employer-provided health coverage on Forms W-2 optional for all employers for 2011.

The IRS provided transition relief (Notice 2011-28 and Notice 2012-9) for qualified small employers. Whether an employer is required to file fewer than 250 Forms W-2 for a calendar year is based on the Forms W-2 that it would be required to file if it filed Forms W-2 to report all wages paid by the employer. This determination is made without regard to use of an agent under Code Sec. 3504, the IRS explained.

Comment: The IRS reiterated that any guidance that changes the transition relief will apply only to calendar years that start at least six months after the guidance is issued.

Reporting

In its updated materials, the IRS explained that the value of the health care coverage will be reported in Box 12 of Form W-2, with Code DD to identify the amount. Generally, the IRS added, the amount reported should include both the portion paid by the employer and the portion paid by the employee.

In the case of a health flexible spending arrangement (health FSA), the amount reported should not include the amount of any salary reduction contributions, the IRS instructed.

The IRS also described when reporting is not required. An employer is not required to issue a Form W-2 solely to report the value of the health care coverage for retirees, or other employees or former employees to whom the employer would not otherwise provide a Form W-2.

Coverage

Certain types of coverage must be reported and other types are optional. Major medical; health FSA value for the plan year in excess of an employee’s cafeteria plan salary reductions for all qualified benefits; and domestic partner coverage included in gross income, are among the types of coverage within the mandatory reporting requirement. Dental or vision plans not integrated into another medical or health plan, and certain other coverage, are among the types of coverage in the optional reporting requirement.

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