Treasury Authorizes Sale of More Citigroup Stock

Earlier today it was reported that the federal government would begin a fourth round of sales of Citigroup stock. The move is part of the fed's ongoing effort to recoup costs from the financial bailouts.

ABC News reports:

The Treasury Department said Tuesday it had given Morgan Stanley, its agent for the sales, authorization to sell an additional 1.5 billion shares of Citigroup stock beginning immediately.

Citigroup received $45 billion in taxpayer support in one of the largest bank rescues by the government. The government also provided the bank with insurance against losses on a pool of $301 billion in assets.

Of the $45 billion in taxpayer support provided to Citigroup, $25 billion was converted to a government ownership stake that the Treasury has been selling off since last spring. The bank repaid the other $20 billion in December 2009.

The announcement of the new stock sales came a day after Citigroup announced that it had posted its third straight quarterly profit.

The bank, which is still 12 percent owned by the government, earned $2.15 billion, or 7 cents per share, in the three months ending in September.

Read more here

The Tax Implications of The New Small Business Jobs Act

In September President Obama signed the Small Business Jobs act into law. The legislation was designed to provide tax cuts to small businesses and increase access to small business capital with a $30 billion fund for local community banks. Just one week after being signed into law the Small Business Administration was able to approve nearly 2,000 loans for nearly $970 million. There were 8 main tax implications of the new legislation, and I have put together the following list of how these changes will affect small business owners.

1. Capital Gains from Business Investments

The first tax cut included in the legislation is a 75% exclusion from capital gains taxes for key small business investments. The act also puts another provision into tax law that will eliminate all capital gains taxes on these investments if they are held for five years. It even eliminates the alternative minimum tax on these sales. The White House estimates that this change will affect over one million small business owners.

2. Expense Investment Limits

The bill raises the amount of investments that businesses can write off for 2010 and 2011. The limit was raised from $250,000 to $500,000. It also expands Section 179 to include improvements to rental property. However, these provisions will expire at the end of 2011.

3. Bonus Depreciation

The act also restores the 50% first-year depreciation for qualifying property through the end of 2010. The President claims that it will allow 2 million businesses to make new investments to stimulate the economy.

4. Self-Employment Deduction

In addition to deducting health insurance expenses for themselves, small business owners and self-employed taxpayers can deduct the cost of their family’s health insurance premiums from their taxable income.

5. Cell Phone Expenses

The legislation also makes it easier for a business to deduct or depreciate cell phones. Before, cell phones were included in the listed property category, meaning that if they were not used mostly for a business purpose then the deduction would be subject to strict limits. However, now the IRS has removed this documentation requirement so that virtually every business owner can qualify for the deduction.

6. Start-Up Expenses

To encourage taxpayers to open new businesses, the bill has increased the amount of start-up expenses that can be deducted. The limit was temporarily raised from $5,000 to $10,000 and the cap on expenditures that triggers a phase-out was increased from $50,000 to $60,000.

7. Five-Year Carry Back

The Small Business Jobs Act also allows qualifying business owners to “carry back” their credits to offset five years of taxes, while also allowing the credits to offset the Alternative Minimum Tax. To ensure that this law only affects small business owners, qualifying businesses must have less than $50 million in annual gross receipts.

8. Limitations on Penalties for Errors

The final tax change in the legislation limits the penalty for failing to report certain tax transactions to a percentage of the tax benefits from the transaction. The penalty had been criticized for imposing a large burden on small businesses.

Questions for the Tax Lady: October 18th, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question: If an "Offer in Compromise" was rejected in 2007 for taxes owed 2001 and 2002, does this affect the Statute of Limitations?

Generally, the IRS has 10 years to collect any unpaid taxes from you. The clock starts running when the IRS officially assesses the taxes – not when you filed the return, or when the taxes were originally due.

Submitting an Offer in Compromise causes the Collection Statute Expiration Date (CSED) to be suspended; which means the clock stops running once the IRS receives your offer and determines that it is processable. Once your offer was rejected, the clock started running again. This means that if you Offer in Compromise was under review for 90 days, an additional 90 days was added on to the CSED dates for you 2001 and 2003 back tax debt.

To sum it up: Your new CSED will be extended by the length of time the IRS reviewed your offer, plus 30 days. For example, if your original CSED was May 15, 2012, and the IRS took 4 months to review your offer before ultimately rejecting it, your new CSED would be October 15, 2010 (add the four months the IRS was reviewing your offer, add on 30 more days).

Question: I filled an automatic six month extension in April, but forgot to get my tax return in by last week's deadline. What should I do Roni?

You need to file your return immediately. The penalties for not filing pile up quickly, so it is in your best interests to file your return as soon as possible. If you will not be able to pay the amount of taxes owed, file anyway; pay what you can, and call the IRS to request an installment agreement for the rest.

Business Use of a Vehicle

Last week the RDTC – Tax Help Blog posted a new article in their deduction of the week series. The entry explains how to deduct expenses related to the business use of a vehicle. You can find a section of the article below, or click here for the full text.

Actual Expense Method

The first option for calculating your deduction is the actual expense method, where you calculate the exact cost of your business use. Expenses include depreciation, licenses, lease payments, gas, insurance, repairs, garage rent, etc. However, in order to calculate this deduction you will have to determine the exact percent of your car usage that was business related, which can very quickly become a huge headache. For more information on the actual expense method, check out IRS Publication 463.

Standard Mileage Rate Method

The second and less complicated way to calculate your deduction is called the standard mileage rate method. You deduct a certain value for every mile driven for business. In 2010 the standard mileage rate is $0.50 for every mile driven, plus all business related tolls and parking fees. This does mean you need to track every mile used for business. This can be done by keeping a logbook to show the date, purpose of the travel and the number of miles driven.

Claiming the Deduction

In order to claim a deduction for the business use of your vehicle you will need to file an itemized return. The costs can be included on Schedule A of your IRS Form 1040. This deduction is part of the miscellaneous itemized deductions, and so subject to the 2% Adjusted Gross Income floor. For more information read Topic 508 on IRS.gov.

Obama: End Tax Breaks to Stop Overseas Hiring

From Google News:

President Barack Obama is renewing his call for Congress to close tax breaks that reward some U.S. companies with overseas subsidiaries, a proposal that has raised concerns among some lawmakers in the president's own party.

In his weekly radio and online address, Obama said the tax breaks encourage companies to create jobs and profits in other countries.

"There is no reason why our tax code should actively reward them for creating jobs overseas," Obama said. "Instead, we should be using our tax dollars to reward companies that create jobs and businesses within our borders."

At issue is a bill that stalled in the Senate last month that would end some tax credits and deferrals for U.S. companies for operations overseas.

Though Obama singled out Republican opposition, the bill also failed to get support from some Democrats, including Senate Finance Committee Chairman Max Baucus, D-Mont., who expressed concern that change would put the U.S. at a competitive disadvantage.

The ending of the tax loopholes has been opposed by business groups, including the National Association of Manufacturers.

Obama said that while companies that conduct business internationally do make an important contribution to the U.S. economy, it doesn't make sense to grant them tax breaks when companies at home are struggling to rebound from the economic crisis.

Dancing Tax Collectors

According to FOX News, tax collectors in the Philippines have released a new viral video to make taxes "a little less taxing." A spokesperson claims that they like to see happy faces on taxpayers, and it looks like their effort has been successful. The department has reportedly doubled their collections as a result of the video. You can find the embedded video below.

IRS Is Taxing My Nobel Prize!

Winning a Nobel Prize comes with a lot of perks, but one thing most people do not realize it also comes with is a tax bill.

Forbes.com reports:

Most of us will never win a Nobel Prize, but if we do, it comes with a tax bill. Our old friend the IRS gets a cut of the roughly $1.4 million USD ($10 million Swedish kronor) cash prize. The 2010 winners may not be complaining, but some may be surprised. See Life After Winning a Nobel Prize. Martin Chalfie, won the 2008 Nobel Prize in Chemistry, lamenting that since the Reagan era when the tax code was changed, the IRS collects tax on prizes just like any other income.

President Obama cleverly avoided tax on his Nobel Peace Prize last year—and got great press—by regifting it. Since Jerry Seinfeld’s eponymous series brought “regifting” out of the closet, 60% of women and 40% of men admit they regift. There’s even a “Gift and Re-Gifts” neighborhood on eBay.

Before 1986, many prizes were tax-free as long as no significant services were involved. Since 1986, though, prizes and awards are taxable.

You can decline an award, as George C. Scott did an Academy Award for Patton in 1971. You can even decline a Nobel Prize to avoid the tax. That’s actually surprising, since the tax law routinely attributes taxable income to you “constructively” when you could have received a payment but chose not to. See When You’ve Got Taxable Income but No Cash.

If you are awarded a cash prize you can turn around and give it to charity but that doesn’t avoid all the tax. Why? You can’t deduct charitable contributions exceeding 50% of your “contribution base”—generally your adjusted gross income. The limit is even lower (30%) for gifts to certain types of organizations. You can carry over excess deductions for up to five years, but in the meantime, are paying tax on monies you’ve given away.

Read more here

Black Friday App Watch: Use Your iPhone to Shop And Save

Next month is one of the biggest shopping days of the year: Black Friday. Years ago retailers focused mostly on newspaper advertisements or mailers, however, in today’s interactive consumers regularly seek out deals online. Therefore it seems only natural that retailers are going to use iPhone Apps to help connect with customers.

Wallet Pop.com put together some of the best Black Friday apps. You can find a section of their article below, or check out the full list here.

Find the lowest prices in the shortest amount of time with the Red Laser app. Simply scan a barcode and Red Laser will find you the best deal by searching both online and in stores near your location. When scanning food products, the free application even provides nutritional information. The quick scanner will help users shop efficiently on Black Friday. Plus, the no-touch scan works perfectly for customers already juggling armfuls of deals.

Rather than searching by barcode, the 99-cent application Save Benjis hunts bargains using key words and categories. This search approach helps customers find low prices before they hit the stores. When you find the best price, purchase items right from the app. Save Benjis even features specials and coupons on many products.

Groupon enthusiasts: Download the Groupon app to save on printer ink, paper and time. The free application allows users to purchase the deals right from their iPhones. It also lets customers to find ones nearby using the iPhones' map and locator. The best part is that users can redeem Groupons directly from an iPhone, eliminating the hassle of printing the deals, or forgetting the proof at home.

For last minute buyers, find local savings nearby by using BeThere Deals. The app finds deals on everything from entertainment to apparel. The discovered deals often save customers up to 50% off original prices. BeThere Deals also finds the cheapest happy hour and restaurant prices for when shoppers work up an appetite. Currently, the free app is only available in a few cities including New York, Chicago, San Francisco, Los Angeles and San Diego, but BeThere Deals promises to add more cities soon.

Continue reading at Wallet Pop.com…

Bernanke Says Federal Reserve Ready to Further Stimulate the Economy

From LATimes.com:

Federal Reserve Chairman Ben S. Bernanke on Friday laid out a case for the central bank to take further action to bolster growth, citing the risks of prolonged high unemployment and a U.S. economy slipping into a deflationary spiral.

In a much-anticipated speech in Boston, Bernanke did not spell out details of how and when the Fed would take action. But the first option that he mentioned was a program of buying additional assets, namely government bonds, in an effort to drive down long-term interest rates and stimulate economic growth.

The central bank is widely expected to announce such a program, known as quantitative easing, at the conclusion of its next policymakers' meeting on Nov. 2 and 3.

"There would appear to be a case for further action," he said at a conference sponsored by the Federal Reserve Bank of Boston.

As Bernanke spoke, the government released statistics showing the so-called core inflation rate, which excludes volatile energy and food prices, was unchanged in September and is now running at an annual rate of 0.8% — well below the Fed's informal desired target of 1.5% to 2%. Separately, there was better-than-expected news on last month's retail sales activity as total sales rose 0.6% from the prior month, boosted by higher auto sales.

Social Security: No 2011 Increase

On Friday, the Federal Government announced that there would be no rise in Social Security benefits next year. This will mark the second year in a row nearly 60 million senior citizens will not receive an inflation adjustment on their payments. According to CNNMoney.com, inflation has been low in the past two years and the Bureau of Labor Statistics reported on Friday that prices were up only slightly over last year. The article continues:

The last Social Security inflation adjustment was in 2009: Beneficiaries got a higher-than-normal 5.8% increase because of a temporary spike in energy prices in the third quarter of 2008.

Soon after, however, energy prices plummeted. Then the bottom fell out of the economy and by the third quarter of 2009 overall price levels had fallen 2.1% from the same period a year earlier. That meant no increase in 2010 Social Security benefit checks.

This year, while there has been some inflation, prices remain lower than they were in the third quarter of 2008 -- and that's the quarter that counts.

Tax Deadline Reminder!

Today – October 15 - is the last day to:

• File your 1040 if you requested an extension. If you are e-filing, anything sent in by 11:59:59 pm will be considered on time. If you are mailing paper forms, do yourself a favor and send via Certified Mail just in case anything gets lost in the post.
• Recharacterize your IRA – if you converted your traditional IRA to a Roth IRA and want to undo it, today is your last day to make that happen.
• Maintain your nonprofit’s tax-exempt status by filing all required tax returns. If you miss the deadline, donations to your nonprofit will not be tax deductible.

If you haven’t filed all your paperwork yet, GET TO IT! Missing the deadline is expensive and completely avoidable with better planning. For more information on today’s important tax deadlines, visit http://www.irs.gov/newsroom/article/0,,id=228389,00.html?portlet=7.

Reporting Workplace Health Benefits Is Optional

The IRS just announced that one of the provisions within the health care reform bill is now optional. The bill requires all employers to report the total value of each employee’s health benefits on his or her W-2. Many people misconstrued this provision and claimed that health benefits would be taxed. (To be clear, employer-paid health benefits are NOT taxable income.) In addition, employers are not required to report this information until 2012 (meaning benefits from 2011 will be reported on the W-2 employees receive in 2012).

Just as we were all getting used to the idea, the IRS announced that reporting the value of benefits for tax year 2011 is optional. So, employers across the country can relax for another year. After that, the amounts will need to be reported, but will still not be taxable for employees.

(hat tip: Kay Bell from Don't Mess With Taxes)

Boomerang Kids: 85% Of College Grads Move Home

According to new statistics, there is a new group of kids in town: the boomerangers. They are college graduates who move back home because of extreme unemployment rates among their age group. Nearly 15% of taxpayers between the age of twenty and twenty-four are unable to find employment. According to CNN Money:

"This recession has hit young adults particularly hard," according to Rich Morin, senior editor at the Pew Research Center in DC.

So hard that a whopping 85% of college seniors planned to move back home with their parents after graduation last May, according to a poll by Twentysomething Inc., a marketing and research firm based in Philadelphia. That rate has steadily risen from 67% in 2006.

"It's peaking at levels we have not seen before," said David Morrison, managing director and founder of Twentysomething.

Mallory Jaroski, 22 graduated from Penn State University in May but has been living at home with her mother while looking for a job in press relations. "It's not bad living with my mom, but I feel like a little kid. I have a little bed, a little room," she says.

Jaroski thought she would stay for summer. But like many others, she's found her stay becoming significantly longer.

"There's almost an expectation that kids will move back home, there is no stigma attached," Morrison said. "The thought now is to move home for 6-12 months but in reality those young adults will be home for a year and a half or longer. Even if they have jobs, they are living at home."

Continue Reading…

Can Using Gift Cards Help You Stick to a Budget?

Most of us only think to buy gift cards for birthday or holiday presents. However, some savvy shoppers are finding a new use for them: budgeting tools. By purchasing gift cards ahead of time for gas, food, and other necessities, it forces them to stick to the budget.

More from WalletPop.com:

The holiday shopping season is drawing near, and if you're like many Americans, you may be wondering where to find the discipline to stay within your budget. Here's a new idea for you: Try using gift cards. You pay for them up front and there's no interest or late fees to pay, unlike credit cards. In fact, you don't need to wait for the holidays; gift cards could help you budget for a big expense like a vacation or a home-improvement project.

But while gift cards might help you establish a greater degree of control over your holiday spending, there are a few things you should keep in mind to stay on track, says Ruth Susswein, deputy director of national priorities for watchdog group Consumer Action. "It's not a bad idea if it helps you stick to a spending limit," Susswein says, although she notes that the people who really need financial discipline might still be tempted to whip out a credit card if their spending goes over the pre-set amount on the card.

There can also be an issue with the cards themselves, Susswein warns. "One thing I would caution is the cards with the most flexibility may cost something to buy and you may not want to waste your limited funds on purchasing the gift card," she said. While most chain retailers don't charge anything beyond the amount that's loaded on the card, the drawback is that you can only use the card at that chain or occasionally at one of its sister brands. If you want a go-anywhere card, you'll generally have to pay for it, and those cards can also hit you with fees.

Furthermore, Susswein points out, gift cards are less secure than their credit or debit counterparts in the sense that if you lose a gift card, it's just like losing cash: It's gone forever. If you plan to purchase gift cards to help you stick to a budget, do your research first so you're informed about any limitations, caveats or fees imposed by the seller.

One final point: Many rewards cards out there will let you cash in your points or miles for gift cards. Susswein advises against this, pointing out that because of the cards' various conversion rates, you almost always get a better bang for your buck if you take an available cash-back option. So instead of using $100 worth of points to purchase a gift card, she says, have those points applied as a statement credit, then take the cash and use it to buy a gift card at a retail store.

Read more here

Rise In Jobless Claims Boosts Fed Easing Expectations

From MSNMoney.com:

New U.S. claims for jobless benefits rose last week, hardening the view the central bank will pump more money into the economy, and keeping pressure on Democrats poised to lose congressional seats in November 2 polls.

At the same time, record-high imports from China helped push the U.S. trade deficit wider in August, while rising food and energy prices pushed inflation at the wholesale level up twice as fast as expected last month.

Initial claims for state unemployment benefits rose to a higher-than-expected 462,000 in the latest week, the Labor Department said on Thursday.

Economists polled by Reuters had expected initial claims at 445,000 in the latest week.

"These numbers don't fall out of the range of expectations, so they don't move the needle too much," said Jason Pride, director of investment strategy at Glenmede Investment and Wealth Management in Philadelphia.

Read the full article on MSNMoney.com here.

IRS Issues Final Regulations on New Basis Reporting Requirement

The IRS released a new press release with final regulations for a new law that requires brokers and mutual fund firms to report the tax basis and other information by stock brokers and mutual fund companies. The law will affect all stock purchased in 2012 and later years. The reporting will be to investors and the IRS.

The press release states:

This additional reporting will be optional for stock purchased prior to these dates.

“This important reporting change means investors will now receive the information they need to more easily and accurately report their gains and losses,” said IRS Commissioner Doug Shulman. “We will continue to work closely with stakeholder groups to ensure a smooth implementation of the new requirement, which reduces the recordkeeping and paperwork burden for millions of taxpayers.”

These regulations, posted today in the Federal Register, implement a provision in the Energy Improvement and Extension Act of 2008. Among other things, the regulations describe who is subject to this reporting requirement, which transactions are reportable and what information needs to be reported. Besides providing numerous examples, they also adopt a number of comments and suggestions received since the proposed regulations were issued last December.

Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, long used to report sales prices, will be expanded in 2011 to include the cost or other basis of stock and mutual fund shares sold or exchanged during the year. Stock brokers and mutual fund companies will use this form to make these expanded year-end reports.

The expanded form will also be used to report whether gain or loss realized on these transactions is long-term (held more than one year) or short-term (held one year or less), a key factor affecting the tax treatment of gain or loss. The expanded form, to be first used for calendar-year 2011 sales, must be filed with the IRS and furnished to investors in early 2012.

The IRS today also announced penalty relief for brokers and custodians for reporting certain transfers of stock in 2011.

IRS Must Use “Plain Language”

Yesterday, President Obama signed H.R. 946 the Plain Writing Act of 2010. This new law requires all federal agencies to use “writing that is clear, concise, well-organized, and follows other best practices appropriate to the subject or field and intended audience.” A rather long-winded way of saying, “write so humans can understand what you mean.”

The bill originated from the Plain Language Action and Information Network (PLAIN), a group of federal employees from a variety of agencies and specialties. Their purpose is to get our government to communicate in ways we can all understand. A lofty goal, no doubt, since our government and the agencies within it seem to get some sick pleasure from creating nearly incomprehensible, unnecessarily verbose documents (to see some examples of the difference in using plain language as opposed to “governmentese” click here).

This law also applies to the IRS, which means every letter we receive from the IRS from now on should be brief, on topic and easy to understand, right? Well, I guess we’ll all see about that. PlainLanguage.gov posted an example of an IRS letter from before the law was enacted and what they think a letter would be after the law is enacted. I guess the “after” letter is easier to understand, and makes the pertinent information more obvious, but what was previously a 7 page letter is now an 11 page letter. Does this sound like it simplifies things at all?

What do you think, will using Plain Language make it easier for us all to understand what the heck our government is doing? I want to hear your thoughts on Twitter. Use #plainlanguage tag to weigh in.

(Hat tip Tax Professor Blog)

Refund Anticipation Loan Alternatives

A few weeks ago I posted a blog entry regarding the IRS’s announcement that they would suspend the availability of the debt indicator next tax season. This indicator was used to identify whether an individual taxpayer would need to have a portion of their refund withheld because of unpaid taxes or other debts, such as unpaid child support or delinquent federally funded student loans.

However, the indicator also enabled tax companies to issue refund anticipation loans (RALs). These refund advances have come under fire over the past few years, because of excessive fees, and some unethical tax preparation offices that target low income taxpayers. Without the debt indicator, tax preparers will not be able to offer RALs.

Since RALs will no longer be available to taxpayers I decided to put together the following list of alternatives. By planning ahead you can prevent yourself from getting into a situation next April where you need extra money in a rush.

File Early

You can file your tax return as soon as tax season begins mid January. If you need your refunds quickly, then you should try to file as early as possible – while making sure you have all the proper documentation. As you get closer to the deadline IRS offices become swamped and it will take longer for them to process your return, and issue a refund. If you need your return quickly, then you should file as early as possible.

E-File your Return

Stop wasting time with paper returns, if you do not already e-file your tax return, then I highly recommend doing so this upcoming tax season. You will get your refund almost as fast as you would with a RAL, but without paying a penny in interest. According to the IRS, paper filers can expect to wait eight to ten weeks for a refund. E-filers, on the other hand, will receive their refunds in only a couple of weeks. Additionally, the likelihood of an error is significantly reduced when you e-file.

Direct Deposit

It is also a good idea to have your refund deposited directly into your bank account. Even if you do not e-file your return, you should still consider opting for direct deposit. When the IRS issues a check, it can take weeks to reach your mailbox. However, when you have the refund direct deposited it will show up in your bank account in as few as ten days.

Visit a Free Tax Preparation Office

If you are worried you might not be able to pay to have your tax return prepared without a RAL, you should consider visiting one of the IRS’s free tax return preparation sites offered by the Volunteer Income Tax Assistance Program (VITA) and the Tax Counseling for the Elderly (TCE) Program. In order to be eligible for the free service, you will need to meet certain income requirements. For more information visit this page on IRS.gov.

Payday Loans

Just in case you do find yourself in a situation where you have no other option, you can always consider a payday advance loan. In order to qualify for an advance you will usually only need a steady job, and proof of income. However, you should always use extreme caution with payday loans, as they are notorious for very high fees and interest rates.

White House Pushes to Extend College Tuition Credit

The popular American Opportunity Tax Credit helped an estimated 12 million college students pay for their education. The popular credit is set to expire at the end of the year, however the President has suggested extending the credit to continue helping students who cannot afford to pay for college.

CNN Money.com reports:

The American Opportunity Tax Credit helped soften the blow of college tuition for more than 12 million students last year, but it's due to expire at the end of this year unless President Obama gets his way.

To remind Congress of the importance of extending the credit, top government advisers spoke to reporters Wednesday about why they believe the break is worth keeping around.

"[Obama] believes that it is important for this to be extended and for families to have the certainty and confidence that this [credit] will be there when they are making the choices about sending their children to college," said Gene Sperling, Counselor to the Treasury Secretary.

The tax break, introduced under the government's 2009 Recovery Act and applicable to 2009 or 2010 college tuition, expands the existing Hope Credit to include more lower- and higher-income Americans.

Unlike the Hope Credit, the AOTC is also partially refundable and covers more of the expenses associated with sending a child to college, like textbooks and computers. It is available for the first four years of post-secondary education, up from two years under the Hope Credit.

Read more here

IRS Releases Draft W-2 Form for 2011; Announces Relief for Employers

According to a new press release, the IRS posted a draft Form W-2 for 2011, to help employers and employees confused about looming changes related to health care reform. Employers use the form to report wages and employee tax withholding.

The IRS also announced that it will defer the new requirement for employers to report the cost of coverage under an employer-sponsored group health plan, making that reporting by employers optional in 2011.

The draft Form W-2 includes the codes that employers may use to report the cost of coverage under an employer-sponsored group health plan. The Treasury Department and the IRS have determined that this relief is necessary to provide employers the time they need to make changes to their payroll systems or procedures in preparation for compliance with the new reporting requirement. The IRS will be publishing guidance on the new requirement later this year.

Although reporting the cost of coverage will be optional with respect to 2011, the IRS continues to stress that the amounts reportable are not taxable. Included in the Affordable Care Act passed by Congress in March, the new reporting requirement is intended to be informational only, and to provide employees with greater transparency into overall health care costs.