IRS Issues Guidance on W-2 Health Care Cost Reporting

The Internal Revenue Service March 29 issued Notice 2011-28, providing interim guidance for employers on reporting the cost of their group health insurance to employees on Forms W-2 beginning in the 2012 tax year.

The notice provides details about the 2012 Forms W-2 in a question-and-answer format. Topics addressed include general requirements under tax code Section 6051(a)(14), which employers are subject to the requirement, what costs are to be reported, and how employers are to report costs on the W-2.

Notice 2011-28 is applicable beginning in January 2013, when employers provide Forms W-2 to employees for tax year 2012, prior to filing the forms with the Social Security Administration.

Until the IRS issues further guidance, the notice made the reporting requirement optional for smaller businesses--those filing fewer than 250 W-2s.

The Patient Protection and Affordable Care Act (Pub. L. No. 111-148) added Section 6051(a)(14), which requires the aggregate cost of applicable employer-sponsored coverage to be reported on Form W-2.

In October 2010, IRS released Notice 2010-69, which made reporting this information optional for 2011 (61 BTM 340, 10/26/10). At the time, IRS and the Treasury Department said this would give employers time to adjust payroll systems and update procedures to comply with new reporting requirements.

In a news release (IR-2011-31) accompanying the new guidance, IRS emphasized that the new reporting is only to provide employees with information about the cost of their health coverage.

IRS and Treasury requested comments on the guidance, including areas that should be addressed in future guidance, the notice said. Comments are due by July 17, 2011.

Notice 2011-28 will be published in Internal Revenue Bulletin 2011-16 dated April 18, 2011.