From time to time DDIFO is pleased to present Guest Commentary from valued contributors. Guest commentaries feature the views and opinions of the contributor and are not necessarily the opinions of DDIFO and it’s Board of Directors. The following is an article written and submitted by Cindy Capobianco, CPA 60 Quaker Lane, Warwick, RI, 02886-0182. Phone: (401)822-199
Effective for 2011 calendar year
For W-2 forms issued in January, 2012 for the 2011 calendar year, there is additional information that must be provided as it relates to the company’s health insurance plan. This information is required by the 2010 Health Care Act.
Under the new provision, an employer is required to disclose on each employee’s annual Form W-2 the value of the employee’s health insurance coverage sponsored by the employer. This “value” is the total aggregate premium of all employer-sponsored health insurance coverage in which the employee participates (medical, dental, vision, etc.).
The employer calculates this value under the rules for COBRA continuation coverage. (For those plans that require employee contributions toward the premium, the reported value will include both employee-paid and employer-paid premiums (i.e. total premium paid)).
The employer-paid portion of the premiums is not taxable to the employees; this reporting is merely for information-gathering at this point in time.
We need to begin setting up systems to track this information so it is ready at W-2 time. Regulations to be issued will render additional guidance.
Effective for 2012 calendar year
Historically, any payment made in a trade or business in excess of $600 in a calendar year for services, rent, and other types of payments to a non-incorporated business requires completion and submission of a Form 1099. (IRC Sec. 6041) One copy of the form goes to the payee, the IRS receives a copy, and most times the state also receives a copy.
As a result of the new Federal health care law, beginning with the 2012 calendar year, this requirement will be expanded to include all entities, whether incorporated or not, and to include “amounts in consideration for property” to the list of payment types requiring reporting.
What does this mean?
This means that virtually every purchase a company makes will now require the production of a Form 1099. There is an exception for payments made by credit card.
This additional reporting will, of course, require much more recordkeeping than under the present requirements. It will add to the paperwork, will create hours upon hours of additional “payment tracking” work, and will add substantially to mailing costs. Complexities will arise if franchisees pay any of their vendors from the daily cash (rather than by checks), as those cash payments will also need to be tracked. Additional complexities arise if there are multiple shops within an entity as purchases from each shop must be aggregated for the company as a whole before applying the $600 threshold.
Until regulations are issued for further guidance, it appears that this law will also apply to payments made within franchisee networks. Reporting will be required for payments to your kitchens, for used equipment you may transfer from one shop to another, supplies and inventory you may transfer intra-network, and similar transactions.
I am sure that chambers of commerce and other business groups will be expressing their opposition to this new rule. However, it can only help the cause if businessowners communicate their dissatisfaction as well. At a time when we are all trying desperately to keep our costs down, this additional recordkeeping burden is contrary to this goal.
The IRS has invited public comment regarding this new rule until September 29, 2010.
Written comments should be submitted to:
INTERNAL REVENUE SERVICE CC:PA:LPD:PR (Notice 2010-51) ROOM 5203 P. O. BOX 7604 BEN FRANKLIN STATION, WASHINGTON, DC 20044
Or comments may be emailed to: Notice.Comments@irscounsel.treas.gov Please include “NOTICE 2010-51” in the subject line of any electronic communications.
Communication with your legislators may be the best course of action at this time to attempt to remove this law before it takes effect in 2012.
Editor’s Note: DDIFO is working in Conjunction with the Coalition Of Franchisee Associations to Lobby against the implementation of this requirement.
You can take action now and alert your Elected Representatives that you are not in favor of requirement.