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Moving to squelch rumors that employees will have to pay taxes next year on the health insurance expenditures paid by their employers, the Obama Administration on Oct. 12 announced a one-year delay on requiring employers to report the cost of providing health coverage for their workers. While it is not the case that employer-provided health insurance will become taxable when reported on the W-2, certain plans will be taxable beginning in 2018 if they are particularly expensive ($27,500 or more for families).
Under the health care law, employers would have been required to report what it costs them to provide health coverage for each employee on the W-2 statements they receive in 2012. The reporting requirement is part of an information effort to determine who purchases health insurance for rules that begin in 2014. Beginning in that year, individuals and families not purchasing health insurance will be assessed a penalty.
In posting its notice, the IRS said the reporting will be optional for W-2s issued for 2011 that are distributed to employees in 2012 in order to “provide employers with additional time to make any necessary changes to their payroll systems or procedures in preparation for compliance with the reporting requirement.”
As a result, the health care cost information will have to be reported on 2012 W-2s, which employees will not actually receive until 2013.
In a separate announcement clarifying this change, the IRS stressed that the “Form W-2 reporting requirement is intended for informational purposes only to provide employees with greater transparency into overall health care costs and that the amounts reportable are not taxable.”
For more information, e-mail Robert Dietz at NAHB, or call him at 800-368-5242 x8285.