Frank Fiorille is the director of risk management for Paychex, Inc., headquartered in Rochester, N.Y.
Use these tips to ensure you are ready for the new W-2 reporting requirements by 2012.
For most construction business owners, doing paperwork is like hitting your thumb with a hammer—an unwanted but unavoidable occupational hazard.
Business owners can operate more effectively by using completed, accurate documentation on everything from contracts with third-party vendors to internal management memos. And now, a new federal law creates new paperwork challenges that affect employees’ tax and wage statements.
Enacted in March 2010, the Patient Protection and Affordable Care Act (PPACA) created several new provisions affecting how businesses examine and report on taxes and health insurance information. In October 2010, to ease employers’ burden in complying with the new W-2 reporting requirements, the Internal Revenue Service (IRS) and U.S. Department of the Treasury waived the requirement that businesses report the value of their healthcare coverage on the 2011 Form W-2. Under this new guidance (Notice 2010-69), employers can delay reporting these amounts by one year until the 2012 W-2s are issued.
Collecting this data may seem daunting for many business owners. Information needed may include accounting for prescription drug and medical plans, executive physicals, on-site clinics, employee assistance programs, Medicare supplemental policies and many others. However, this reporting excludes salary reduction contributions made to medical flexible spending accounts (FSAs), contributions to medical savings account (MSA) and health savings account (HSA) plans, and stand-alone dental and vision plans.
As construction business owners prepare for the new regulations, developing a strategy for capturing employee data should be the first step for 2012 and beyond. Follow this workable process to collect healthcare benefits information needed on the 2012 W-2s:
Watch for IRS updates. The IRS provides resources for complying with W-2 reporting at www.irs.gov. As a definitive arbiter on this provision, the agency defines the issues employers should monitor. The IRS also has provided a working draft of the W-2 Form at www.irs.gov. The document uses an existing W-2 data box to code employer-sponsored healthcare coverage, making it easy for employees to adapt to the new format. Employers have the opportunity to give the IRS direct feedback on the draft form.
Find the right educational re-sources and allies . Working with your payroll department and payroll providers will help you find guidance on the W-2 issue. Many providers work closely with the Treasury Department and will provide clients with ongoing updates on key provisions, even beyond W-2 forms. While most providers will not give specific tax or legal advice, many can offer general information on how changing legislation affects business.
Additionally, employers should connect with their payroll provider to determine how they will assist in complying with the new requirements.
Be prepared to issue W-2s for certain non-employees. Further guid- ance is expected from the IRS on additional parties who may require W-2s. These parties may include surviving spouses, retirees of a company and COBRA participants. While further guidance is pending, employers can meet any reporting requirements through information regularly received from their insurance provider.
Beware of myths and rumors. While many people assume the new healthcare coverage amount reported on the W-2 form is taxable, the IRS maintains it is not. Showing healthcare payments on the W-2s merely provides information intended to give employees a greater awareness and transparency of spending on healthcare premiums each year.
The ultimate goal of evolving W-2 regulations is to help people become more cautious and prudent in managing their expenses and healthcare options. New regulations offer employers the ability to manage their employees’ healthcare information on an existing, yet significant document. As employers adjust to the new process, many resources are available to help navigate along the way.
Construction Business Owner, February 2011