October 15, 2010

IRS Releases Draft W-2 Form for 2011; Announces Relief for Employers

The Service issued draft Form W-2 for 2011, the information return employers use to report wages and withholding. It announced that it will defer the new requirement for employers to report the cost of coverage under an employer-sponsored group health plan, making that reporting by employers optional in 2011.

The draft Form W-2 includes the codes that employers may use to report the cost of coverage under an employer-sponsored group health plan.  The Treasury Department and the IRS have determined that this relief is necessary to provide employers the time they need to make changes to their payroll systems or procedures in preparation for compliance with the new reporting requirement. The IRS will be publishing guidance on the new requirement later this year.

Although reporting the cost of coverage will be optional with respect to 2011, the IRS continues to stress that the amounts reportable are not taxable. Included in the Affordable Care Act passed by Congress in March, the new reporting requirement is intended to be informational only, and to provide employees with greater transparency into overall health care costs.

October 05, 2010

1099 Misc Changes

A section of the new healthcare reform legislation impacts the administrative burdens of all business, including religious and nonprofit organizations, though IRS regulations may soften the blow. As of now, beginning with payments made on January 1, 2012, if you pay any person or corporation more than $600 in a year for goods or services, you must report that to both the IRS and the entity or person whom you paid. For example, if you bought office supplies for $1,000, you would have to report that on your income tax returns and issue a 1099 to the company from which you made the purchase. Fortunately, there is now an exemption for credit card transactions, but that doesn’t apply if you paid by cash or check. (Section 9006 of the Healthcare Bill expands Section 6041 of the Internal Revenue Code.)

Note also, for those receiving credit card payments, the new Form 1099-K will be filed with the IRS by payment settlement entities, with a copy sent to the payee. The form is aimed at preventing underreporting of credit card sales by businesses. The forms will be required for credit card payments made after December 31, 2010.