Obamacare - W-2 Reporting Requirements

August 25, 2013

4:05 PM

On March 23, 2010, President Obama signed the Affordable Care Act (ACA) into law, this health care legislation has since come to be known as Obamacare. The ACA continues to have significant employment tax and information reporting implications for businesses. Originally, effective in 2011, the value of employer-sponsored health insurance was to be reported on Form W-2. IRS Notice 2010-69 made the filing optional for all in employers in 2011 and Notice 2011-28 extended to small businesses the option to postpone reporting until at least 2013.

The ACA required that employers report the cost of insurance coverage under the employer-sponsored group health plan. Just because the cost of the insurance benefit is reported on the employee’s W-2 does not mean that the coverage is taxable. Any value of the employer’s excludable contribution to the health care plan remains excludable from an employee’s income, and remains non-taxable. The W-2 reporting requirement is for informational purposes only and will provide employees with useful information on the cost of their health care coverage.

Employers that provide “applicable employer –sponsored coverage” under a group health plan are subject to this reporting requirement. This includes businesses, tax-exempt organizations, and federal, state, and local government entities. Federally recognized Indian tribal governments are not subject to this requirement.

For purposes of this reporting requirement, “applicable employer-sponsored coverage” includes coverage under any group health plan made available to an employee by the employer, regardless of whether the employer or the employee pays the cost.

What is NOT included as an “applicable employer-sponsored coverage”?

The IRS has stated that applicable employer-sponsored coverage does not include:

Stand-alone dental or vision coverage (if it qualifies as a "HIPAA-excepted" benefit)
Contributions to an Archer medical savings account (MSA), health savings account (HSA) and salary reductions into a medical FSA (employer flex credits to a medical FSA are reportable)
Health reimbursement arrangement (HRA)
Coverage under an employee assistance program (EAP), wellness program or on-site medical clinic, provided that the employer does not charge a premium with respect to that type of coverage provided under COBRA
Coverage only for a specified disease (if it qualifies as a “HIPAA-excepted” benefit and is paid for on an after-tax basis by the employee)
Coverage for long-term care
Accident-only insurance coverage
Hospital indemnity or other fixed indemnity insurance (if it qualifies as a “HIPAA-excepted” benefit, if the employer makes no contribution to the cost of coverage that is excludable from an employee's gross income, and if the premium is paid for on an after-tax basis by the employee)
Contributions made on behalf of an employee to a multi-employer plan

If you weren’t confused before reading this, I am sure you are by now. The changes taking place as a result of ACA continue to create issues for the IRS and taxpayer’s alike. So should you or should you not report, well it's best to find out since the Small Business Job’s Act of 2010, increased the penalties for incorrectly or untimely filed W-2 forms:

$30 per return if the Form W-2 is filed correctly within 30 days (maximum penalty is $250,000 per year). For small businesses (gross receipts of $5,000,000) has a maximum penalty of $75,000/yr.
$60 per return if the Form W-2 is correctly filed more than 30 days after the due date but by August 1. (maximum penalty is $500,000/yr. and $200,000/yr. for small businesses)
$100 per return if the Form W-2 is correctly filed after August 1. . (maximum penalty is $1,500,000/yr. and $500,000/yr. for small businesses)
The penalty for failure to furnish a correct W-2 to an employee increases to $100 per return with a maximum penalty of $1,500,000.

If you have questions about your company’s health care plan, or what should or should not be reported on the employee’s W-2, you need to seek the assistance of your Accountant, or Tax Advisor. As the payroll year end is speedily approaching it's best to find out sooner, than later.

Beverly Lang

Comments (3)

Comment Feed

More Clarification on IRS Regulations

I also apologize for any panic - but as stated, the information keeps changing which is why I suggested that you reach out to your Accountant. Just to share more light on the information I have seen - please take a look at this.

The IRS released Notice 2011-28 which provides guidance on the reporting of the cost of employer sponsored health insurance on employee's W-2s. The notice contains 31 questions and answers designed to help employers understand the reporting requirements. The announcement, and a copy of Notice 2011-28, can be found at http://www.irs.gov/newsroom/article/0..id-237870,00.html

In a significant development for many employers, the IRS has further delayed the W-2 reporting requirement for employers with less then 250 employees. The delay applies to any employer required to file fewer than 250 W-2s for the 2011 tax year. These employers will not be required to report health insurance costs on employees W-2s until the 2013 tax year (i.e. W-2s that are provided to employees early in 2014).

Employers who file 250 or more W-2s for tax year 2011 are still required to report health costs on W-2s beginning with the 2012 tax year.

Beverly Lang more than 11 years ago

Only applies if >250 employees

I think you did a grave disservice to your readers by failing to mention that if a company/organization has less then 250 employees, than this W-2 reporting is optional. After reading your article, I sent a panicked email to our payroll service, who in turn informed me of the 250-employee threshold. The vast majority of employers using QuickBooks have well under 250 employees.

Darryn Ambrose more than 11 years ago

Sorry for 'your panic', and thanks for pointing out the current threshold.

Our article discussed how cloudy these requirements seem to be due to continual changes by the Administration. Under something the IRS now calls "Transitional Relief" the current level appears to be 250 W-2 filings, previously the number was 150.

Because our article was not written exclusively to QuickBooks users, but any employer with payroll; and because these (and other related requirements) are continually changing, which was a key point of our article, we pointed out in our closing paragraph, that employers should in fact "seek the assistance of their Accountant or Tax Advisor" for the most current requirements concerning applicability to their company and health care plan.

But thanks again for pointing out the present W-2 threshold. And thanks for reading Intuitive Accountant.

insightfulaccountant.com more than 11 years ago