Newly Released Report States That IRS Reporting Penalties are Coming

 

By now it should come as no surprise that the IRS has been stretched thin when it comes to their ability to implement penalties associated with the Employer Shared Responsibility Provision of the Affordable Care Act (Obamacare). Over the past couple of years, the IRS has been tasked with creating new tools that will allow them to identify Applicable Large Employers and then determine their Compliance within the Employer Mandate guidelines. Now we know that they are serious.

On April 7th the Treasury Inspector General for Tax Administration (TIGTA) released their recent audit report of the IRS’s efforts to implement employer penalties. This report outlines both the agency’s findings and their recommendations. A full copy of the report can be found here. A summary of the report is located on page 3 of the document.

Perhaps the most important take away for employers can be found in Recommendation 7 of the assessment. This recommendation (which was agreed upon by the IRS) states, “ensure that forms 1094-C and forms 1095-C management reports correctly report errors statistics”. What this means is that the IRS is working on an “ACA Compliance Validation” system which will identify all non-compliant Applicable Large Employers (ALEs). These employers will then be subject to penalties under section 4980H for the tax year 2015.

This system was initially scheduled to come online in January of 2017. This date was pushed back and is now scheduled to be operational in May of 2017.

So what is the Take away for Large Employers?

  • The Internal Revenue Service fully intends on implementing systems to allow them to accurately identify 1094-C filings by May of this year.
  • The purpose of these systems is to collect penalties from all employers who did not comply with the Employer Shared Responsibly Provisions and filings.
  • Other IRS systems outlined in the assessment are also undergoing improvements, all of which are aimed at collecting money for non-compliance.

Many have taken the stance of, “let’s see what happens to the ACA”. Employers who are taking that stance, may be playing a dangerous game.

If you have not yet filed your forms 1094-C and 1095-C for 2015 or 2016, we can help. Please give us a call at 888-978-8310 or email us at support@acareportingservice.com.

President Trump’s ACA Executive Order

Anyone keeping up with the news recently has probably seen headlines mentioning new Executive Orders executed by President Trump. Very shortly after being sworn into office on January 20th, newly elected President Trump signed an Executive Order beginning to outline his Administrations intent to repeal the Affordable Care Act (ACA).

No-one yet knows how long the law will remain in effect. However it was made clear in the Executive Order that it is “Imperative for the executive branch to ensure that the law is being efficiently implemented”. It also stated that all executive departments should “take all actions consistent with the law to minimize the unwarranted economic and regulatory burdens of the ACA”. The order then mentions that there should be an effort to afford states more flexibility and control in order to create a more open healthcare market.

After the release of the Executive Order, many are still trying to determine what this all means. What will happen to the individual mandate? What does this mean for insurers? Will employers still have to comply with IRC section 6056? What about the exchanges? Before addressing these things it is imperative to first review some key language from the Executive Order itself.

Sec. 2. To the maximum extent permitted by law, the Secretary of Health and Human Services (Secretary) and the heads of all other executive departments and agencies (agencies) with authorities and responsibilities under the Act shall exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.

Sec. 3. To the maximum extent permitted by law, the Secretary and the heads of all other executive departments and agencies with authorities and responsibilities under the Act, shall exercise all authority and discretion available to them to provide greater flexibility to States and cooperate with them in implementing healthcare programs.

Sec. 4. To the maximum extent permitted by law, the head of each department or agency with responsibilities relating to healthcare or health insurance shall encourage the development of a free and open market in interstate commerce for the offering of healthcare services and health insurance, with the goal of achieving and preserving maximum options for patients and consumers.

Sec. 5. To the extent that carrying out the directives in this order would require revision of regulations issued through notice-and-comment rulemaking, the heads of agencies shall comply with the Administrative Procedure Act and other applicable statutes in considering or promulgating such regulatory revisions.

The executive order may in fact first and foremost be a political play. President Trump ran an entire campaign on the promise of dismantling the healthcare law and replacing it with “Something Fantastic”!  Obviously this lays out the ground work for Tom Prince, Andrew Puzder and Steven Mnuchin, incoming HHS, Labor and treasury secretaries (Respectively).

Currently, none of these gentlemen have been confirmed by the Senate and therefor there will be some time elapse before they can take any action.

When they are in a place to take action there are still many steps that have to be taken first.  For instance if any action is to be taken regarding loosening any rules this will most likely require new proposed regulations. This in turn is followed by a review and implementation period. On top of this the Democratic Party is not planning on “playing nice”. To sum it all up any changes will inevitably take some time. These things typically take a while (possibly years) even way they are noncontroversial.

Another widely mentioned impact of the Executive order would be the issuing of blanket hardship exemptions to all who enroll in coverage. This could be another way of “loosening” the impact of the individual mandate. However while this can be done in theory it is not practical at all. Granting hardship exemptions to all would essentially implode the current healthcare exchanges as carriers must have the individual mandate in order to offset the risk taken on when enrolling those with pre-existing conditions. Again, possible but not likely.

Lastly, many are wondering what this means for the employer mandate and therefore employer reporting. So far there has been no word specifically on this. One thing is for sure, until the Treasury Department announces something different the current law of the land still stands. This means that all employers should be prepared to furnish 1095Cs to employees by early March and also plan to have these filed with the IRS by the March 31st deadline.

 

 

We Can Help With 2015 (Prior Year) ACA Reporting


If you are in this position and need help, contact our support team.  We can help.


Recently some employers have began to receive IRS notices for not filing their 2015 ACA Forms (1094-B, 1095-B, 1094-C & 1095-C).

Recently the Internal Revenue Service (IRS) has begun to mail out Notice letters to large employers all over the country who have not yet filed their 2015 Affordable Care Act Reporting. These letters are serving as a final effort to inform large employers of their need to file informational returns or face a steep penalty.

VIEW THE NOTICE HERE

Internal Revenue Code (IRC) Section 6056 requires employers that are ALE’s (50 or more FTEs) to file information returns with the IRS and provide statements to their full-time employees relating to the health insurance coverage. ALEs meet these requirements by using form 1094-C and form 1095-C.

Any employer who receives these notice letters from the IRS is required to fill out associated documents and return them to the IRS within 30 days. These documents indicate whether or not the employer has received the notice in error.

The IRS is requiring large employers to provide applicable reporting under Section 6056 no less than 90 days from the date of notice. If employers fail to provide the appropriate informational returns within 90 days they will be assessed penalties under IRC Section 6721. These penalties include:

  • Penalty of $250 for each informational return not filed on time.
  • Penalty of $500 per for each informational return “intentionally” not filed.
  • Maximum Penalty charge of $3,000,000.00 per year for failure to file.

In addition to the penalties above, employers may also face both 4980H(a) and 4980H(b) penalties for failure to provide the right type of health coverage at the right type of cost.

If you are a large employer and received this notice ACAReportingService can help. As a full service provider, we are able to assist with all of your reporting needs, even for the 2015 tax reporting year.

IRS Begins Releasing Requests for Employer reporting for the 2015 tax year

Applicable Large Employers (ALEs) are beginning to receive request letters from the IRS from the IRS regarding their 2015 Affordable Care Act Reporting. Failure to supply correct informational returns will result in applicable penalties.

Recently the Internal Revenue Service (IRS) has begun to mail out Notice letters to large employers all over the country who have not yet filed their 2015 Affordable Care Act Reporting. These letters are serving as a final effort to inform large employers of their need to file informational returns or face a steep penalty.

VIEW THE NOTICE HERE

Internal Revenue Code (IRC) Section 6056 requires employers that are ALE’s (50 or more FTEs) to file information returns with the IRS and provide statements to their full-time employees relating to the health insurance coverage. ALEs meet these requirements by using form 1094-C and form 1095-C.

Any employer who receives these notice letters from the IRS is required to fill out associated documents and return them to the IRS within 30 days. These documents indicate whether or not the employer has received the notice in error.

The IRS is requiring large employers to provide applicable reporting under Section 6056 no less than 90 days from the date of notice. If employers fail to provide the appropriate informational returns within 90 days they will be assessed penalties under IRC Section 6721. These penalties include:

  • Penalty of $250 for each informational return not filed on time.
  • Penalty of $500 per for each informational return “intentionally” not filed.
  • Maximum Penalty charge of $3,000,000.00 per year for failure to file.

In addition to the penalties above, employers may also face both 4980H(a) and 4980H(b) penalties for failure to provide the right type of health coverage at the right type of cost.

If you are a large employer and received this notice ACAReportingService can help. As a full service provider, we are able to assist with all of your reporting needs, even for the 2015 tax reporting year.

IRS Extends Due Date

IRS Extends Due Date for Employers and Providers to Issue Health Coverage Forms to Individuals

On November 18, 2016, the IRS extended the 2017 due date for providing 2016 health coverage information forms to individuals. Insurers, self-insuring employers, other coverage providers, and applicable large employers now have until March 2, 2017 to provide Forms 1095-B or 1095-C to individuals, which is a 30-day extension from the original due date of January 31.

Notice 2016-70, also extends transition relief from certain penalties (IRC Sections 6721 and 6722) to providers and employers that can show that they have made good-faith efforts to comply with the information-reporting requirements for 2016 for incorrect or incomplete information reported on the return or statement.  This Notice also provides guidance to individuals who, as a result of these extensions, might not receive a Form 1095-B or Form 1095-C by the time they file their 2016 tax returns.is also abating penalties for inadvertent errors and omissions where there was a good-faith effort to comply with the reporting requirements.

The due dates for filing 2016 information returns with the IRS remain unchanged for 2017. The 2017 due dates are February 28 for paper filers and March 31 for electronic filers.

Due to these extensions, individuals may not receive Forms 1095-B or 1095-C by the time they are ready to file their 2016 individual income tax return. While information on these forms may assist in preparing a return, the forms are not required to file. Taxpayers can prepare and file their returns using other information about their health insurance and do not have to wait for Forms 1095-B or 1095-C to file.

Post Election Results, ACA Reporting and Compliance

Well, regardless of the outcome, at least as of Tuesday its over!  For that alone we can all be thankful …

But now what?

Employers still have looming deadlines to provide forms 1095 to their employees by the last day in January 2017 and complete their E-File of ACA Forms to the IRS by the last day in March 2017.  The marketplace has been essentially on hold waiting on the results of the election, and now it is time to figure out what steps are necessary to stay compliant.

We will be holding a number of webinars to help employers get back on track.

Learn more here and register for an upcoming event.


Quick Facts We Will Cover:

  • Employees must receive their forms 1095 by January 31st, 2017
  • The IRS must receive your E-File of ACA forms by March 31st, 2017
  • It IS NOT NECESSARY for you to code each 1095-C form on your own, by hand
  • You do still have plenty of time to stay compliant, affordably.

Correcting Aggregated Group ACA Reporting

One of the most common errors employers make while completing their ACA reporting is the incorrect combining of aggregated group filings.  The instructions for ACA reporting requires each ALE member to complete their own separate ACA reporting for their employees.  This can be very confusing to some employers and consultants simply because they might have employees from numerous different EIN entities all covered under the same medical plan.  To help you understand this, lets take an example employer.

Example Employer

Common ownership group of 10 separate EIN companies, each having 100 employees each.  This same group has all 1,000 total employees covered under one medical plan.

The error occurs when the combined ‘control group’, known as an Aggregated Group under ACA rules, files (1) form 1094-C with (1,000) forms 1095-C to complete their reporting.  Filing this way causes a number of problems:

  • The one entity filed 900 forms 1095-C on people who were not their actual employees
  • Nine additional entities did not file anything to the IRS
  • Both instances will trigger penalties

Unwinding this error is quite complex.  If you are unfortunate enough to be reading this blog and need assistance, contact customer support for assistance.

ACA Reporting: Can I Still File For 2015?

Although tragic, this is a very common question in the marketplace for Applicable Large Employers (ALEs) who failed to file their ACA reporting for the prior year.  If this is you, then yes you can and do still need to file.  You will of course have penalties for not providing forms 1095-C to your employees as well as late penalties for failing to e-file by the 2015 ACA reporting deadline.  However, all of this is better than willful negligence with increases your penalties and comes into plan if you simply do not report.  Contact customer support for more information, and also review our prior blog posts on:

 

Responding to Exchange Letters to Employers

As part of the enforcement of the employer mandate under ACA, employers will receive letters from the state and federal exchanges regarding persons who did the following:

  • They went to the exchange,
  • Received coverage from that exchange,
  • Listed a specific employer as their employer of record at the time, AND
  • They received a subsidy which reduced the cost of that coverage to them and their family

All of these things must happen in order for you to receive an exchange letter as an employer.  You will also notice that we did not say that they were an employee but rather called them a ‘person’.  The reason for this is that we are seeing many instances where persons reported to the exchanges that they were an employee of ABC Corporation when they were not.  This is a critically important point for employers because we often will hear an employer say, “We did not respond to the exchange letter because it wasn’t our employee”.  Wrong answer!

You must respond to all exchange notices regardless of the circumstances under which you received one because you are essentially guilty until proven innocent.  The same thing goes for part time employees or other individuals on whom you receive an exchange notice but did not have a duty to provide them coverage.  If you simply do not respond to the exchange letter then your time will be up after 90 days and you will be sent a bill for the penalties on that person.


What should be included in responding to Exchange Letters?

Although there has not yet been specific guidance provided in how to respond to exchange letters, it is reasonable to believe you should include any pieces of information and documentation regarding the employment and offer of coverage to the person in question.  This could include payroll records, dates of employment and an overall explanation of your position.  It should also certainly include a copy of the form 1095-C on this person which was E-filed to the IRS.

Are you beginning to see why having correct ACA reporting is of such critical importance?  If you would like to learn more about this as well as all of the changes in ACA reporting from 2015 to 2016, take a look at our recorded webinar entitled, “2016 ACA REPORTING – PLANNING FOR THE 2016 UPDATES AND NEW REPORTING FORMS”