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Adding Obamacare data to W-2 tax form may confuse -U.S. IRS

November 19, 2013

By Patrick Temple-West

WASHINGTON, Nov 19 (Reuters) – U.S. Internal Revenue Service officials fretted on Monday about an idea being pushed by some businesses to expand the ubiquitous W-2 tax form to include more healthcare data in an effort to avoid the creation of a new IRS form.

“The number of fields on the W-2 is a little sacrosanct,” said Stephen Tackney, an IRS lawyer working on new agency rules to implement President Barack Obama’s healthcare law.

At an IRS hearing on the rules, which have still not been finalized, Tackney said: “We’re a little concerned … those (W-2) instructions are going to start getting a little confusing for people.”

At issue is the IRS’s need for more information from large businesses on whether they are offering affordable and minimum essential coverage to employees, as Obamacare mandates.

Providing data of this sort means more red tape and higher compliance costs. To minimize that, some companies are saying the W-2 should be used. The compact, one-page W-2 form already reports basic data on employees such as wages, federal income tax, Social Security tax and Medicare wage tax withheld.

Employees get the W-2 from their employer each year no later than Jan. 31 and file it with the forms they use to pay taxes.

“There is a view among employers that if they could get it on the W-2 in a simple manner that this would actually aid tax reporting,” said Seth Perretta, a tax lawyer with Crowell & Moring, representing the American Benefits Council, a corporate lobbying group focused on employee benefits, at the hearing.

Businesses want to use the W-2 to tell the IRS, for instance, when an employee was offered healthcare coverage during the year, or any changes in healthcare coverage for employees’ children, he said.

The IRS hearing was held to get feedback about the agency’s proposed Affordable Care Act reporting rules for businesses.

In July, the Obama administration delayed until 2015 the ACA healthcare reporting requirements and penalties for businesses. Tackney and other IRS officials declined to say when they will finalize the business reporting rules.

The IRS already caused confusion for individuals when it changed the W-2 form for healthcare reporting requirements in 2012, said Jeffrey Porter, who heads the tax division of the American Institute of Certified Public Accountant.

He said on Monday that an even a longer W-2 “is going to confuse the average taxpayer.”