IRS Believes that Typical Information Reporting Penalties Will Apply to Employers Not Complying with W-2 Health Care Rules

On the April 7 payroll industry conference call, Scott Mezistrano from IRS Employment Tax discussed recent IRS guidance in Notice 2011-28, 2011-16 IRB 656, on the W-2 reporting rules for employer-sponsored health insurance coverage.

Beginning with 2012 W-2s (filed in 2013), most employers will be required to report the cost of employer-sponsored health insurance coverage on Form W-2 (see Code Sec. 6051(a)(14)). During the conference call, the IRS was asked what would be the ramifications for an employer if it failed to report this information on Form W-2. Mezistrano noted that penalties are not discussed in Notice 2011-28, 2011-16 IRB 656; however, this new reporting requirement is now part of the general IRS W-2 reporting requirements in federal law, and, therefore, Mezistrano believed that an employer who failed to comply with the requirement would be subject to the same information reporting penalties that otherwise apply to Form W-2.

Mezistrano said that employers would need to file a Form W-2c if the health care information on Form W-2 was reported incorrectly.

Mezistrano also noted that an employer would not be subject to the health care W-2 reporting requirements with respect to employees who terminate employment before the end of the year and who request to receive their W-2 before the usual January 31 deadline (see Notice 2011-28, 2011-16 IRB 656, Q&A-6).

Mezistrano pointed out that Notice 2011-28, 2011-16 IRB 656, is interim guidance. The IRS is accepting comments for 90 days on all aspects of the interim guidance and the reporting requirements.