Payroll & Business Experts Blog

W-2 Reporting on Health Care Costs Now Optional

Posted by PrimePay Business and Experts Blog

Oct 15, 2010 10:15:00 AM

health care benefit reporting on W-2sOn October 12, 2010, the Internal Revenue Service (IRS) issued a notice that it will delay for another year the requirement that employers report the value of an employee’s health care benefits on their W-2 form.  The W-2 reporting requirement for health care coverage costs is now optional for 2011. 

View the IRS News Story:  IRS Releases Draft W-2 Form for 2011; Announces Relief for Employers

The IRS Gives Employers More Time to Prepare for W-2 Reporting
The IRS and the Treasury Department decided to give employers more time to make changes to their payroll systems and procedures in order to comply with the new reporting requirement.  For the 2012 tax year, employers who provide health insurance will be required to include the cost of that health care coverage on their employees’ W-2 forms. 

A draft of the 2011 Form W-2, which has been posted on the IRS website, shows that if an employer chooses to report 2011 health care costs to their employees, these amounts will be reported in Box 12 of the form using the code “DD”.   Additional guidance from the IRS on this requirement is expected by the end of the year.

Health Care Costs Reported on W-2s are Not Taxable
The IRS reiterated that the reported amounts on an employee’s W-2 are for informational purposes only and are not taxable.  Stephanie Cutter, Assistant to the President for Special Projects, addressed this same subject on The White House Blog in her blog post… Putting an Old Rumor to Rest.

The IRS added some language on the draft of the 2011 Form W-2 to clear up any miscommunication as to whether the reported costs of health care benefits are taxable. 

On the ‘Notice to Employee’ is the following information:

Cost of employer-sponsored health coverage (if provided by the employer).  The reporting in Box 12, using Code DD, of the cost of employer-sponsored health coverage is for information only.  The amount reported with Code DD is not taxable.

The reporting requirement, which was included in the Patient Protection and Affordable Care Act of 2010, is to give employees more information on health insurance costs and the value of this employer-sponsored benefit. 

NOTE:  We have included a mention at the beginning of two of our previous blog articles on W-2 reporting... New W-2 Health Care Reporting Requirements: The When & What and New W-2 Reporting Requirements: What's Exempt & Determining a Value... which states that this reporting requirement is now optional for 2011.

Topics: health care reform, W-2 forms

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