Nov 02, 2022IRS Announces Higher Fines for ACA Reporting Failures
The IRS has announced that employers that fail to file ACA Forms 1095 in 2024 (reporting for 2023) can be subject to a $310 penalty per form.
It’s that time of year again – Applicable Large Employers (ALEs), and small employers with self-insured plans, will soon be required to provide full time employees with Form 1095-C, and the IRS with Form 1094-C. For calendar year 2022, Forms 1094-C and 1095-C are due March 2, 2023 (or March 31, 2023, if filing electronically).
The law also provides for the provision of an automatic 30-day extension by filing Form 8809, Application for Extension of Time to File Information Returns. No signature or explanation is required for the extension. However, you must file Form 8809 on or before the due date of the returns.
An Applicable Large Employer (ALE) is one that had an average of 50 or more full time employees in the preceding calendar year. Hours of service of full time equivalent (e.g. part time employees) are also considered for determining ALE status. Companies with multiple business units connected through common ownership must combine employee totals due to IRS controlled group rules.
|Fully-Insured Plan||Self-Insured Plan|
|Non-ALE||Not required to file.||Forms 1094-B and 1095-B.|
Forms 1094-C and 1095-C
(Part III will not be completed)
|Forms 1094-C and 1095-C for employees. (Either B-Series or C-Series forms for non-employees).|
|Insurance Provider||Forms 1094-B and 1095-B.||Not applicable.|
2022 versions of Forms 1094-C and 1095-C are currently available from the IRS and can be downloaded from the IRS website here: https://www.irs.gov/forms-instructions
Electronic filing under the IRS “AIR” system is required for entities that have 250 or more information returns, and the IRS encourages electronic filing by employers of all sizes.
In addition to the penalty scheme for employers subject to the pay-or-play employer mandate, there are additional penalties assessed for failure to file required returns with the IRS, and separately for failure to furnish forms to employees. However, many of these proposed penalties were actually not collected due to discretionary relief. In a 2020 Treasury Inspector General report it was observed that between 2015 – 2016 the IRS issued $17 billion in proposed ACA penalties, but only collected $749 million. The IG’s office was critical of IRS efforts to enforce the ACA and therefore we expect to see increased compliance activity. We have already seen an uptick in the number of notices issued under Sections 6721 and 6722 (failure to file and failure to furnish forms) and it has been reported that relief granted for these violations will end following tax year 2020. Companies that intentionally disregard informational reporting requirements can be subject to a penalty of $550 per form, and penalty caps can range between $556,500 and $3.3 million for companies with revenue over $5 million.
The IRS also reminded large employers in 2020 that there is no statute of limitations for the assessment of ACA penalties.
Furthermore, the 2022 Inflation Reduction Act provided the IRS with nearly $80 billion in additional funding, much of which is directed to enforcement activity.
Here are a few steps to take to be fully prepared for ACA reporting come February:
This information is general and is provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.