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IRS issues one-year delay for reporting health costs on W-2s

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in Small Business Tax,Small Business Tax Deduction Strategies

The health care reform law signed in March includes a provision that requires your organization to report the value of the health insurance provided to an employee on the employee’s Form W-2. But the IRS said last month that it will delay the requirement for at least one year.

The IRS says reporting health costs will be optional for 2011 W-2s (which employees actually receive in January 2012).

“This relief is necessary to provide employers the time they need to make changes to their payroll systems or procedures in preparation for compliance with the new reporting requirement,” says the IRS announcement.

The IRS also published a draft Form W-2 for 2011 that includes the codes employers can use to report the cost of coverage. You can access the draft W-2 here.

Look for the IRS to publish more guidance on the new requirement later this year.

More details: The new reporting requirement doesn’t change the tax treatment of employer-provided premiums. They’re still tax-free.

The new rules require employers to list the aggregate cost of “applicable employer-sponsored coverage” on W-2 forms. That includes the value of any medical, dental and vision coverage paid by the employer. Those per-employee cost numbers will become more relevant in 2018, when high-cost health plans become subject to the excise tax on “Cadillac” plans.

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