Year end: Health Coverage (Affordable Care Act)

The new Health Coverage reporting requirements are a result of the Affordable Care Act (enacted in March, 2010), which requires employers to report the cost of coverage under an employer-sponsored group health plan on employees' Form W-2.

Is it taxable? No. Reporting the cost of health coverage on the Form W-2 does not mean that the coverage is taxable. The value of the employer's excludable contribution to health coverage continues to be excludable from an employee's income, and it is not taxable. This reporting is for informational purposes only and will provide employees useful and comparable consumer information on the cost of their health care coverage.

It depends. The magic number this year is 250. (This number may change next year.)

Did you file more than 250 W-2 forms with the Social Security Administration (SSA) in the current tax year?

• Yes—you're required to report the cost of health care coverage on your employee's W-2 forms for the tax year.
• No—you're not required to report it (but can if you want).

For details about the reporting requirements — who needs to report the info and who doesn't — see IRS: Employer-Provided Health Coverage Informational Reporting Requirements.

Here's what you'll need to do:

1. Determine whether you're required to report health coverage in the tax year.
2. If you're required to report it, or simply choose to do so, figure out the costs for each employee.
3. When preparing your employees' W-2s in QuickBooks Online Payroll, fill in the info when prompted. Then print your employees' copies (B, C & 2), and submit the copies to the SSA (A & D).

The amounts will show up in the employees' Form W-2, Box 12, under code DD.

Whether you're required to report or choose to report, you must report the total costs of all applicable employer-sponsored coverage, which is defined as "coverage under a group health plan that the employer makes available to the employee that is nontaxable to the employee (or that would be nontaxable if the coverage were employer-provided)."

Common examples include:

• Major medical
• Health flexible spending arrangement (FSA, employer-paid portion only)
• Hospital indemnity (pre-tax employer or employer paid)
• EAP, if included in COBRA
• Onsite medical clinic coverage, if included in COBRA
• Wellness programs, if included in COBRA
• Domestic partner coverage

Certain types of coverage are specifically excluded by the Affordable Care Act and the IRS has excluded some others (until further notice). Other types of coverage are optional to report.

For a complete list of coverage, see the chart provided on the IRS: Form W-2 Reporting of Employer-Sponsored Health Coverage website.

Start with your QuickBooks Online Payroll Deductions and Contributions report for the tax year. This report includes both employer and employee contributions for different group plans. However, it probably doesn't include everything that required to be reported, so you might need to get statements or reports from your group plans. Be sure to review the chart provided on the IRS: Form W-2 Reporting of Employer-Sponsored Health Coverage website to make sure you're including the required (and optional) info only.