Source: https://www.bakerdonelson.com/Employers-Subject-To-New-Payroll-Reporting-Requirements-In-2011-02-16-2011
Timestamp: 2019-04-22 18:13:25+00:00

Document:
Effective January 1, 2011, several payroll tax related provisions under the Internal Revenue Code (Code) have changed. Because the first payroll tax reporting deadline for many employers is quickly approaching, employers should be aware of the new requirements and implement the necessary changes to comply with the new laws.
Section 9002 of the Patient Protection and Affordable Care Act2 (PPACA) added Code Section 6051(a)(14), which requires employers to report the total value of an individual employee’s health benefits on the employee’s W-2 form.3 The change is informational only and does not affect the income tax exclusion of the value of coverage provided to the employee. However, despite the mandatory reporting requirement of PPACA, in order to provide some transition relief to employers the IRS announced that reporting by employers is optional for Forms W-2 issued in 20114. Employers should consider adopting the optional disclosure and use 2011 as a test run for implementing changes to payroll systems that will be necessary to comply with the disclosure requirements in 2012.
Under the new provision, employers must determine and report the value of “applicable employer-sponsored coverage” provided to employees. “Applicable employer-sponsored coverage”5 means coverage under any group health plan made available to the employee by the employer that is excludable from the employee’s gross income under Code Section 1066 (or that would be excludable if it were considered employer-provided coverage under Code Section 106). Therefore, the term includes not only traditional medical care coverage, but also Medicare supplemental coverage, employer-provided Medicare Advantage plans, on-site medical clinic services, and health reimbursement accounts.
Certain types of coverage are specifically excluded from the reporting obligation. salary reduction contributions to health FSAs, life insurance or disability insurance, long-term care coverage, stand-alone dental and vision plans, workers’ compensation insurance, and hospital indemnity or other fixed indemnity insurance (if paid for with employee after-tax dollars) are specifically excluded from the new reporting requirements.
Although final regulations regarding new reporting requirements with respect to incentive stock options (ISOs)10 and employee stock purchase plans (ESPPs)11 were implemented in 2009, 2011 is the first year the new requirements will result in additional filing obligations. Under the regulations finalized in 2009, if an employee exercises an ISO or if employer stock under an ESPP is transferred during 2010, the employer must report such transfers to the IRS and the employee.12 Prior to implementation of the regulation, filing with the IRS was not required.
1. Jon Seawright is an attorney in the Jackson, MS office of Baker Donelson and focuses his practice on health care and tax matters. Profile available at www.bakerdonelson.com/jon-d-seawright.
2. Pub. L. No. 111-148, 124 Stat. 119 (2010), as amended by the Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, 124 Stat. 1029 (2010). As of the date of publication, many plaintiffs have filed suits challenging the constitutionality of all or parts of PPACA. Two district courts have upheld PPACA and two district courts have struck down all or parts of PPACA. Most recently, on January 31, 2011, United States District Court for the Northern District of Florida struck down PPACA as unconstitutional. The court’s order is available at http://www.flnd.uscourts.gov/announcements/documents/10cv91doc150.pdf. See also, Virginia v. Sebelius, 728 F. Supp. 2d 768 (E.D. Va. 2010) (holding PPACA violates the commerce clause); contra Liberty Univ., Inc. v. Geithner, 2010 WL 4860299 (W.D. Va. Nov. 30, 2010) (holding PPACA was a proper exercise of constitutional authority) and Thomas More Law Center v. Obama, 720 F. Supp. 2d 882 (E.D. Mich. 2010) (holding PPACA constitutional). All opinions and rulings are available at www.pacer.gov.
4. Notice 2010-69, 2010-44 IRB 576 (10/12/2010), available at www.irs.gov/irb/2010-44_IRB/ar13.html.
5. The term is defined in Code Section 6051(a)(14) by cross reference to the definition in Code Section 4980I(d)(1).
6. Code Section 106 generally provides that gross income of an employee does not include employer-provided coverage under an accident or health plan.
7. Technical Explanation Of The Revenue Provisions Of The “Reconciliation Act Of 2010,” As Amended, In Combination With The “Patient Protection And Affordable Care Act, ” Joint Committee on Taxation Report (JCX-18-10) (March 21, 2010), available at www.jct.gov/publications.html?func=startdown&id=3673.
10. An ISO is a grant to an employee by an employer corporation (or its parent or sub) to buy stock or ownership interests in one of those corporations that satisfies certain statutory requirements. Treas. Reg. § 1.421-1. To qualify as an ISO, the requirements of Code Section 422 must be met. If those requirements are met, there are no regular income tax consequences when an ISO is granted or exercised and the employee has capital gain when the stock is sold at a gain. Code Section 421(a).
11. ESPPs are options issued to employees under an employer plan to buy stock in the employer and which satisfy the statutory requirements of Code Section 423. The employee pays no tax on the option or the stock acquired pursuant to an ESPP until he disposes of the stock. Code Section 421(a). If the option price is at least equal to the stock’s fair market value (FMV) at grant, the gain upon disposition of the stock is capital gain. But gain is ordinary compensation income (to the extent of the spread between option price and FMV of stock when option is exercised) if the stock is sold within two years after the option was granted or within one year after its exercise. Treas. Reg § 1.423-2.
12. Treas. Reg. § 1.6039-1.
13. Treas. Reg. § 1.6039-1(a).
14. Treas. Reg. § 1.6039-1(b).
15. See instructions included with Form 3921 and Form 3922, available at www.irs.gov.
17. Treas. Reg. § 31.6302-1(h)(2)(iii).

References: v. 
 v. 
 v. 
 § 1
 § 1
 § 1
 § 1
 § 1
 § 31