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Another Dreaded IRS Reporting Requirement Gets Interim Guidance Today. Health Coverage Reporting Requirement on Form W2
By Stacie Clifford Kitts, CPA
Well here it is, guidance on more reporting requirements. If you are an employer providing health insurance coverage for your employees, Good For You. And….. now the IRS wants to track it. So add this to the long list of other reporting requirements dear business owners. If you file 250 or more W2’s, starting in 2012 you will need to report employee health insurance premiums on Form w2. Employers with less than 250 W2’s are exempt until further notice. I guess there is always a small sliver of a silver lining.
WASHINGTON — The Internal Revenue Service today issued interim guidance to employers on informational reporting on each employee’s annual Form W-2 of the cost of the health insurance coverage they sponsor for employees. The IRS is also requesting comments on this interim guidance. The IRS emphasized that this new reporting to employees is for their information only, to inform them of the cost of their health coverage, and does not cause excludable employer-provided health coverage to become taxable; employer-provided health coverage continues to be excludable from an employee’s income, and is not taxable.
The Affordable Care Act provides that employers are required to report the cost of employer-provided health care coverage on the Form W-2. Notice 2010-69, issued last fall, made this requirement optional for all employers for the 2011 Forms W-2 (generally furnished to employees in January 2012). In today’s guidance, the IRS provided further relief for smaller employers (those filing fewer than 250 W-2 forms) by making this requirement optional for them at least for 2012 (i.e., for 2012 Forms W-2 that generally would be furnished to employees in January 2013) and continuing this optional treatment for smaller employers until further guidance is issued.
Using a question-and-answer format, Notice 2011-28 also provides guidance for employers that are subject to this requirement for the 2012 Forms W-2 and those that choose to voluntarily comply with it for either 2011 or 2012. The notice includes information on how to report, what coverage to include and how to determine the cost of the coverage.
IRS Patrol: IRS Provides Help For Small Employers Eligible to Claim the Small Business Health Tax Credit for the 2010 Tax Year.
Help is always nice to get – specially with all the new tax rules out there – and more on the way. I can hardly keep them all straight. If you are wondering if you qualify for this credit read on.
WASHINGTON — The Internal Revenue Service today released final guidance for small employers eligible to claim the new small business health care tax credit for the 2010 tax year. Today’s release includes a one-page form and instructions small employers will use to claim the credit for the 2010 tax year.
New Form 8941, Credit for Small Employer Health Insurance Premiums, and newly revised Form 990-T are now available on IRS.gov. The IRS also posted on its website the instructions to Form 8941 and Notice 2010-82 , both of which are designed to help small employers correctly figure and claim the credit.
Included in the Affordable Care Act enacted in March, the small business health care tax credit is designed to encourage both small businesses and small tax-exempt organizations to offer health insurance coverage to their employees for the first time or maintain coverage they already have.
The new guidance addresses small business questions about which firms qualify for the credit by clarifying that a broad range of employers meet the eligibility requirements, including religious institutions that provide coverage through denominational organizations, small employers that cover their workers through insured multiemployer health and welfare plans, and employers that subsidize their employees’ health care costs through a broad range of contribution arrangements.
In general, the credit is available to small employers that pay at least half of the premiums for single health insurance coverage for their employees. It is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers.
Small businesses can claim the credit for 2010 through 2013 and for any two years after that. For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small businesses and 25 percent of premiums paid by eligible tax-exempt organizations. Beginning in 2014, the maximum tax credit will increase to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible tax-exempt organizations.
The maximum credit goes to smaller employers –– those with 10 or fewer full-time equivalent (FTE) employees –– paying annual average wages of $25,000 or less. The credit is completely phased out for employers that have 25 or more FTEs or that pay average wages of $50,000 or more per year. Because the eligibility rules are based in part on the number of FTEs, not the number of employees, employers that use part-time workers may qualify even if they employ more than 25 individuals.
Eligible small businesses will first use Form 8941 to figure the credit and then include the amount of the credit as part of the general business credit on its income tax return.
Tax-exempt organizations will first use Form 8941 to figure their refundable credit, and then claim the credit on Line 44f of Form 990-T. Though primarily filed by those organizations liable for the tax on unrelated business income, Form 990-T will also be used by any eligible tax-exempt organization to claim the credit, regardless of whether they are subject to this tax.
- Health Care Tax Credits for Small Businesses Nationwide (whitehouse.gov)
- How Tax Laws Impact a Sole Proprietorship Business (thinkup.waldenu.edu)
- 10 Tax Tips for the Suddenly Unemployed (turbotax.intuit.com)
- Attention Small Employers: New Small Business Health Care Tax Credit Can Help Cut Health Care Costs (eon.businesswire.com)
- How Tax Laws Impact a Sole Proprietorship Business (thinkup.waldenu.edu)
- New report: Employer health insurance premiums increased 41 percent from 2003 to 2009 (eurekalert.org)
- New Report: Affordable Care Act Could Save Families Over $3,000 Per Year (whitehouse.gov)
IRS Patrol: IRS Releases Draft W-2 Form for 2011; Announces Relief for Employers (Optional Reporting of the Cost of Health Coverage in 2011)
Stacie says: Doesn’t good news come in three’s? Well here is good news number two for the day – the IRS announced that it will defer the new requirement for employers to report the cost of coverage under an employer-sponsored group health plan. The reporting is now optional in 2011.
WASHINGTON — The IRS today issued a draft Form W-2 for 2011, which employers use to report wages and employee tax withholding. The IRS also announced that it will defer the new requirement for employers to report the cost of coverage under an employer-sponsored group health plan, making that reporting by employers optional in 2011.
The draft Form W-2 includes the codes that employers may use to report the cost of coverage under an employer-sponsored group health plan. The Treasury Department and the IRS have determined that 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. The IRS will be publishing guidance on the new requirement later this year.
Although reporting the cost of coverage will be optional with respect to 2011, the IRS continues to stress that the amounts reportable are not taxable. Included in the Affordable Care Act passed by Congress in March, the new reporting requirement is intended to be informational only, and to provide employees with greater transparency into overall health care costs.
WASHINGTON — The Internal Revenue Service today issued guidance reflecting statutory changes regarding the use of certain tax-favored arrangements, such as flexible spending arrangements (FSAs), to pay for over-the-counter medicines and drugs.
The Affordable Care Act, enacted in March, established a new uniform standard that, effective Jan. 1, 2011, applies to FSAs and health reimbursement arrangements (HRAs). Under the new standard, the cost of an over-the-counter medicine or drug cannot be reimbursed from the account unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles. The new standard applies only to purchases made on or after Jan. 1, 2011, so claims for medicines or drugs purchased without a prescription in 2010 can still be reimbursed in 2011, if allowed by the employer’s plan.
A similar rule goes into effect on Jan. 1, 2011 for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs).
Employers and employees should take these changes into account as they make health benefit decisions for 2011.
For details on current rules, see Publication 969 , Health Savings Accounts and Other Tax-Favored Health Plans.
- IRS Health Savings Accounts (HSAs) – Eligibility and Rules (personal-tax-planning.suite101.com)
- The California Endowment Launches Statewide Effort to Educate Californians About the Benefits of the Health Care Law (eon.businesswire.com)
- Sebelius Announces 1 Million Medicare Beneficiaries Have Received Prescription Drug Cost Relief Under The Affordable Care Act (medicalnewstoday.com)
- Patient Money: High-Deductible Plans Grow, but Not Everyone Should Get on Board (nytimes.com)
- 16.6 million small business employees could benefit from ACA provisions starting this year (eurekalert.org)
- An Unexpected Answer on the Affordable Care Act & the Deficit (whitehouse.gov)
- Podcast interview: Impact of health reform on Flexible Spending Accounts (healthbusinessblog.com)
- Nearly 2,000 Employers and Unions Approved into New Affordable Care Act Program (nlm.nih.gov)
- Koch Industries Slaps Health Care Law With One Hand While Holding the Other Hand Out (crooksandliars.com)