The Internal Revenue Service just issued new guidance to employers on reporting the value of employee health benefits, and gave small business an extended exemption on reporting.

IRS issued interim guidance to employers on informational reporting on each employee’s annual Form W-2 of the cost of the health insurance coverage they sponsor for employees. The new reporting is for information only, to inform employees of the cost of their health coverage, and does not cause “excludable” employer-provided health coverage to become taxable.

The Affordable Care Act originally provided that employers were required to report the cost of employer-provided health care coverage on the Form W-2. Notice 2010-69, issued last fall, made this requirement optional for all employers for the 2011 Forms W-2, generally furnished to employees in January 2012. Under the new guidance, the IRS extended the optional reporting to small employers — those filing fewer than 250 W-2 forms — through at least 2012 and until further notice.

IRS Notice 2011-28 also provides guidance for employers that are subject to the reporting requirement for the 2012 Forms W-2 and those that choose to voluntarily comply with it for either 2011 or 2012. The notice includes information on how to report, what coverage to include and how to determine the cost of the coverage.

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