IRS offers new W-2 relief … to some companies

Good news, particularly for Payroll: Your company may have just been handed an extra year before it has to report employees’ health insurance costs on their W-2s. Does your company qualify?

It was yet another unpopular provision of last spring’s health reform law: All employer-provided health insurance coverage data must be reported on employee W-2s.

But IRS just issued interim guidance clearing some major confusion surrounding the new requirement.

IRS Notice 2011-28 offers:

• a new break for smaller businesses, as well as
• clarification on retiree health benefit reporting.

Count those W-2s this year-end

This year-end will be critical to the cause. That’s because the number of W-2s your company files in ’11 will dictate whether or not your company gets an extra year to comply with the new reporting requirements.

The magic number? 250.

File fewer than that many W-2s for 2011 and your company won’t need to include health care coverage information on your 2012 W-2s.

That’s the threshold set by the new interim guidance. If you fall under that threshold, your company’s in the clear until Jan. 2014.

These folks don’t count in your counts

One group you won’t have to count in those W-2 tallies: any retirees your company continues to offer health insurance to.

The new guidance clarifies that organizations don’t need to issue W-2s for this group if all you provide them is health insurance.

No matter when your company is charged with complying, you’re bound to run into one thing: questions from nervous employees, such as

• Do I have to report this on my income taxes?
• Are you taxing me on these benefits?

Best to ease minds as soon as possible. Remind all employees the change is administrative only. It won’t make employer-provided health coverage taxable – it’s strictly for informational purposes.

For the full IRS Notice 2011-28, click.