Q: I have been hearing about the new W-2 reporting requirements under the Health Care Reform Act and have a few questions. (1) Are employers now required to report the value of employee benefits on each employee’s W-2 form? (2) Does the value of benefits become taxable income to the employee? (3) What amount should the employer report on the Form W-2 for health coverage – the amount the employer paid, the amount the employee paid, or both?
A: (1) Yes, many employers are required to meet this reporting requirement for 2012 W-2s, which will generally be mailed in January of 2013. However, the IRS has provided transitional relief from the requirement for small employers for the 2012 tax year. For 2012 W-2s, an employer is not subject to the reporting requirement if the employer was required to file fewer than 250 W-2s for the 2011 calendar tax year. (2) No, the reporting requirement in no way changes the tax treatment of employee benefits. The reporting requirements were simply put into place to provide each employee with an idea of the value of his/her benefits package, so the employee may take it into consideration when considering life changing decisions that affect benefits, such as changing jobs, transferring to part time status, etc. The IRS has stated that “the purpose of the reporting is to provide useful and comparable consumer information to employees on the cost of their health care coverage.” (3) For most plans, the amount reported on the W-2 should include both the portion the employee contributed and the portion the employer contributed to the plan. It is important to consult with your accounting professional regarding exceptions to this general rule.
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