Although the individual mandate no longer applies for 2019, the Affordable Care Act (ACA) requirements for employers are very much in play. Specifically, Applicable Large Employers (or ALEs) with 50 or more full-time or full-time equivalent employees must provide access to qualifying health coverage.
Just as important as providing proper coverage, employers must file 1095-C annual information returns with the IRS and send summary statements to recipients/employees. Neglecting to meet any of these requirements can result in steep penalties, something every employer should be mindful of under current IRS laws.
Here’s a closer look at five critical factors regarding ACA compliance as we head into the upcoming tax-filing season:
An ALE may be penalized if it doesn’t offer minimum essential coverage (MEC) to at least 95% of its full-time employees and their dependents.
For calendar year 2019, the per-employee penalty for not offering MEC to eligible employees increased to $2,570 annually per full-time employee (minus the first 30 full-time employees).
A second type of penalty may be imposed if you offer coverage, but it isn’t affordable or doesn’t provide the ACA standard for minimum value. This penalty has increased to $3,860 annually per full-time employee who receives a tax credit for calendar year 2019.
In addition to satisfying the health coverage requirements, ALEs must report information to the IRS and send summary statements to employees via the 1095-C form (and 1094-C transmittal). Late filings can result in a $50-$270 penalty (depending on the delay), with intentional disregard costing as much as $540 per form.
Remember: Penalties are incurred per form, which includes the IRS information return and the recipient/employee statement. Therefore, if you fail to file a correct 1095-C with the IRS and don’t provide a correct statement to the recipient/employee, you may be subject to two penalties. And depending on the oversight, the maximum amount for the calendar year can reach into the millions.
During the initial years the ACA was enacted, the IRS withheld enforcement of ACA coverage and reporting requirements to give businesses time to adjust and prepare. Not anymore. The IRS is now sending out Letter 226J to notify employers of any penalty assessments. To date, over 30,000 letters have been sent levying over $4 billion in fines. The IRS has finished sending letters for tax year 2016 and is now focusing on letters for 2017 and 2018 filings.
As should be obvious now, ACA reporting is still required! The deadlines for filing are:
(Note: these dates are the anticipated due dates. As of 10/7/19, the IRS has not released the final due dates.)
Under the recently signed Taxpayer First Act, many businesses will no longer be able to submit paper forms and will have to file electronically, instead. The current 250-return threshold will remain the same for calendar year 2020, but will drop in the coming years, as follows:
You can ease your tax-filing burden by working with an online e-filing service such as efileACAforms.com. With this affordable and efficient service, you simply upload ACA form data (or complete the forms online) and we can do the rest — including e-filing the 1095 forms with the IRS and, optionally, printing and mailing copies to employees.