3 minute read: *updated February 11, 2021
Every year, the IRS requires employers to furnish Forms 1095-C to their full-time workforce, in addition to filing them with the tax agency. Failing to do so could result in penalties under Internal Revenue Code Section 6722 as we’ve now seen with the IRS issuing penalty assessments using, among others, penalty notices under Letter 5005-A/Form 886-A.
In what appears to have become an annual rite, the IRS has extended the deadline for distributing Form 1095-C for the 2020 tax year to full-time employees to March 2, 2021. The new deadline also applies for distributing Form 1095-B to employees. This latter form is used by employers with self-funded insurance programs.
The March deadline was extended from January 31, 2021, the standard furnishing deadline following the previous tax year. This deadline applies to employers with 50 or more full-time employees and full-time equivalent employees, which the IRS refers to as Applicable Large Employers or ALEs. Many employers have started to issue Forms 1095-C to their employees, despite the extended deadline being available.
Employers should ensure their employee census information is correct before filing their information with the IRS as the agency will cross-reference employee details provided with the information available in the Social Security Administration’s (SSA) database. As a reminder, when there is a mismatch between these two, the IRS will flag the submission as a Taxpayer Identification Number (TIN) Error, which can result in penalties under IRC 6721.
Bottom line, be sure to furnish your Forms 1095-C for the 2020 tax year by March 2, 2021 if you want to avoid future penalties under IRC 6722. Be sure to also accurately file Forms 1095-C and 1094-C with the IRS by the appropriate deadline to avoid penalties under IRC 6721. Never miss a deadline with this helpful desk reference.
For reporting on the 2020 tax year, penalties for failing to file and furnish can be as much as $560 per return.
For the 2019 tax year, such penalties can be as much as $550 per return. For the 2018 tax year, such penalties can be as much as $540 per return. You can find a list of IRS penalty rates by clicking here.
Employers should note that the IRS continues to issue penalties for ACA non-compliance under IRC Section 4980H, the Employer Shared Responsibility Provisions (ESRP), commonly referred to as the Employer Mandate.
As a reminder to employers in conjunction with the Employer Shared Responsibility Payment (ESRP), the ACA’s Employer Mandate, Applicable Large Employers (ALEs) (employers with 50 or more full-time employees and full-time equivalent employees) are required to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets Minimum Value (MV) and is Affordable for the employee or be subject to Internal Revenue Code (IRC) Section 4980H penalties.
It’s clear that the IRS is continuing with its efforts to enforce the ACA, and with the issuance of penalties for failing to distribute Forms 1095-C to employees and to file Forms 1094-C and 1095-C with the federal tax agency by required deadlines under IRC Section 6721 and 6722 in addition to Section 4890H penalties being assessed through Letter 226J.
Staying on top of the filing and furnishing deadlines is one way to help prevent your company or client from being issued an IRS penalty assessment for the ACA. Here’s a helpful desk reference to help keep you on track for the 2020 tax year.
We’re committed to helping companies reduce risk, avoid penalties, and achieve 100% ACA compliance. For questions about the ACA contact us here.