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The health care reform law passed earlier this year included a provision that requires employers to report the value of the health coverage provided to employees on W-2’s beginning in 2011 (for W-2’s generally issued in 2012). This requirement has had employers scrambling to figure out what programming changes would be needed for their payroll systems in 2011. It has been difficult to identify which coverage and exactly what amounts would need to be reported.
However, recent guidance issued by the IRS indicates that W-2’s issued for 2011 do not need to include the cost of health coverage during 2011. It is optional for 2011 and employers will not be subject to any penalties for not reporting on W-2’s issued for 2011. This relief is intended to provide employers with additional time to make changes to payroll systems and procedures. Even though the reporting of costs will be optional in 2011, the amounts reported are not taxable and are intended to provide employees with information on their overall health care costs.
A draft form for W-2’s for 2011 can be found at http://www.irs.gov/pub/irs-utl/draft_w-2.pdf
Additional guidance on this requirement is expected in late 2010. We will provide updates as they become available.