2013 Payroll Tax Changes: W-2 Healthcare Reform Reporting Requirements

HR Management
by Stephen Bruce, PhD, PHR

Reporting employer-provided health care coverage is required under the Affordable Care Act;while not a new 2013 payroll tax, it is a change to the W-2 form that employers need to be aware of.

Healthcare Reform W-2 Reporting Requirements are Not New 2013 Payroll Taxes

With all of the recent discussion over 2013 tax rates, it is important to remember that this reporting requirement is not a new 2013 payroll tax change. On the contrary, it is just a requirement that the amount spent on healthcare be recorded. “It set up its own section of the Internal Revenue Code, but it does nothing to change (at this moment) the taxation of healthcare,.” Vicki M. Lambert confirmed in a recent BLR webinar. Don’t misunderstand, she noted:.” Healthcare is still non-taxable.”

In other words, this new reporting requirement is for informational reporting only to provide employees with useful and comparable consumer information on the cost of their health care coverage. This is being done for consumers to get a better picture of what the healthcare costs are. Since employers pay different portions, the total cost was previously difficult to determine on an individual basis.

This coverage total is reported in box 12, code DD on the W-2 form. The amount reported under code DD is the entire cost of the employee’s health care coverage during the year. This is the combined cost of the employer and employee portion together.

Healthcare Reform W-2 Reporting Requirements: Is Your Organization Covered?

Reporting is required for all employers unless they are eligible for transition relief. However, even if eligible for transitional relief, this is only temporary. Transitional relief for 2012 will be given to all employers who filed less than 250 W-2’s in 2011. It basically means that the employer is small enough to be temporarily exempt. But this may change in 2013.

Employers will have at least 6 months after the guidance is issued before reporting is required for the next calendar year. The IRS must advise by June 30, 2013, whether the healthcare cost reporting will be required for employers with less than 250 employees. If they do issue that requirement by that date, then smaller employers may have to include this information on the 2013 W-2s that are issued in January 2014.

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