IRS Begins Requesting Missing ACA Returns from Employers

Despite an uncertain future for the Affordable Care Act (ACA), the IRS is moving forward with enforcement efforts for 2015.  Employers have recently begun receiving IRS Letter 5699 requesting Forms 1094-C and 1095-C for 2015.  The letter notifies the recipient that it may have been an applicable large employer (ALE) in 2015 with ACA reporting obligations and that the IRS has not yet received Forms 1095-C for 2015.  The returns were due on June 30, 2016, for electronic filings through the ACA Information Reporting (AIR) system, or May 31, 2016, for paper filing (see prior coverage).

The letter requires that, within 30 days from the date of the letter, the recipient must provide one of the following responses: (1) the recipient was an ALE for 2015 and has already filed the returns; (2) the recipient was an ALE for 2015 and is now enclosing the returns with the response; (3) the recipient was an ALE for 2015 and will file the returns by a certain date; (4) the recipient was not an ALE in 2015; or (5) an explanation of why the recipient has not filed the returns and any actions the recipient intends to take.

Code section 6056 requires ALEs to file ACA information returns with the IRS, and furnish statements to full-time employees relating to any health insurance coverage the employer offered the employee.  Failure to file returns may result in penalties under Section 6721 (penalties for late, incomplete, or incorrect filing with IRS) and Section 6722 (penalties for late, incomplete, or incorrect statements furnished to payees, in this case, employees).  Importantly, the “good faith” penalty relief previously announced by the IRS applies only to incorrect or incomplete ACA returns—not to late filing of returns (see prior coverage).  Accordingly, ALEs who failed to file the required returns by the deadline may be subject to penalties of up to $520 for each return they failed to file with the IRS and furnish to employees, in addition to any employer shared responsibility penalties that may apply if the ALE failed to offer the required coverage.

While the change in political administration casts uncertainty on the future of the ACA and its penalties, the IRS’s actions indicate that its enforcement efforts are moving forward.  The request for missing ACA returns may mean that the IRS will begin assessing ACA reporting penalties and employer shared responsibility penalties in the near future.  Accordingly, ALEs that have not yet filed the 2015 ACA returns should do so as soon as possible and timely respond to Letter 5699 if they receive one.

IRS Extends Deadline for Furnishing ACA Statements to Individuals And Good-Faith Transition Relief

Today, the IRS in Notice 2016-70 extended the deadline for certain 2016 information reporting requirements under the Affordable Care Act (ACA), as employers and other coverage providers prepare for their second year of ACA reporting.   Specifically, providers of minimum essential coverage under Code section 6055 and applicable large employers under Code section 6056 will have until March 2, 2017—not January 31, 2017—to furnish to individuals the 2016 Form 1095-B (Health Coverage) and the 2016 Form 1095-C (Employer-Provided Health Insurance Offer and Coverage).  Because this extended deadline is available, the normal automatic and permissive 30-day extensions of time for furnishing ACA forms will not apply on top of the extended deadline.  Additionally, the Notice extended good-faith transition relief from penalties under Code sections 6721 and 6722 to 2016 ACA information reporting.

Filers should note that, unlike Notice 2016-4, which extended the deadlines for both furnishing to individual taxpayers and filing with the IRS the 2015 ACA forms, Notice 2016-70 did not extend the deadline for filing with the IRS the 2016 Forms 1094-B, 1095-B, 1094-C, and 1095-C—and this deadline remains to be February 28, 2017 (or March 31, 2017, if filing electronically).  Filers may apply for automatic extensions for filing ACA forms by submitting a Form 8809 and seek additional permissive extensions.  Late filers should still furnish and file ACA forms as soon as possible because the IRS will take into account this timing when determining whether to abate penalties for reasonable cause.

The extended furnishing deadline means that some individual taxpayers will not have received a Form 1095-B or Form 1095-C by the time they are ready to file their 2016 tax return.  The Notice provides that these taxpayers need not wait to receive these forms before filing their returns.  Instead, taxpayers may rely on other information received from their employer or other coverage provider for filing purposes, including determining the taxpayers’ eligibility for the premium tax credit and confirming that they received minimum essential coverage.

Notice 2016-70 also extended the good-faith transition relief for 2016 returns.  Specifically, filers that can show that they made good-faith efforts to comply with the ACA reporting requirements for 2016 are not subject to penalties under Code sections 6721 (penalties for late, incomplete, or incorrect filing with IRS) and 6722 (penalties for late, incomplete, or incorrect furnishing of statement to individual taxpayers).  This relief would apply to missing and inaccurate TINs and dates of birth, and other information required on the ACA form.  It does not apply where a filer does not make a good-faith effort to comply with the regulations or where the filer failed to file or furnish by the applicable deadlines.