Expiring ITINs May Affect ACA Compliance
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The IRS has announced that nearly two million ITINs are set to expire in 2019. What does this mean for your business and ACA compliance? We have the answers.
What is an ITIN?
An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the IRS. The IRS issues ITINs to process and account for tax returns and payments from individuals who are not eligible for Social Security numbers. ITINs may be issued to non-resident or resident immigrants required to file federal tax returns, as well as their dependents or spouses.
Millions of ITINs are set to expire at the end of 2019
The IRS recently posted an announcement urging affected taxpayers to renew expiring ITINs as soon as possible. Failing to do so may result in refund delays and disallowed tax credits and exemptions for filings submitted in 2020. Once the ITIN is renewed, the credits, exemptions, and refunds will be restored. Under the Protecting Americans from Tax Hikes (PATH) Act, enacted in 2015, ITINs that are unused in the last three consecutive years will expire on December 31, 2019. Further, ITINs with middle digits 83, 84, 85, 86 or 87 will expire if not renewed.
What does this mean for your business?
The major downside of failing to renew an ITIN falls on the taxpayer in the form of IRS delays. However, there could be important ramifications for your operations if your employees don’t renew their ITINs in a timely manner. One area of concern arises in compliance with the Affordable Care Act’s Employer Mandate.
Under the ACA’s Employer Mandate, organizations with 50 or more full-time employees and full-time equivalent employees, known as ALEs, 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 penalties. Employers submit forms 1094-C and 1095-C to the IRS each year to verify their obligations under the Employer Mandate. Form 1095-C, furnished to each employee, contains individual employee information, such as the employee’s social security number or other Taxpayer Identification Numbers (TIN). TIN is an umbrella term used by the IRS to refer to a Social Security Number (SSN), Employer Identification Number (EIN), ITIN, or an Adoption Taxpayer Identification Number (ATIN).
If your employees fail to renew their ITINs, you may be faced with a situation where there are TIN validation errors identified by the IRS on your ACA annual filings. Failure to correct or resolve the errors may result in penalties under Internal Revenue Code section 6721/6722 under Notice 972CG. Penalties can also be imposed upon employers for failing to provide the correct information.
Here’s what you should do
Consider conducting an ACA Penalty Risk Assessment. Such as assessment will review your 1094-C and 1095-C forms for previous filing years to ensure that no data errors have been made in your organization’s filings that might put your organization at risk of ACA penalties. You may want to consider using outside experts in ACA compliance to help you with this audit. Many companies will offer this type of service at no cost to you.
To learn more about ACA compliance for the 2019 tax year, click here.
For ACA reporting deadlines in 2020 for the 2019 tax year, organizations should review this link for important dates and requirements.
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