While 2023 ACA reporting deadlines have passed, ACA compliance efforts and ACA penalties will remain prevalent moving forward.
IRS enforcement of the now 14-year-old healthcare law is ramping up, thanks in part to a series of legislative changes, including the Inflation Reduction Act and American Rescue Plan.
The tax agency has made clear its intentions to increase tax enforcement efforts, including ACA non-compliance. With over 87,000 new tax examiners and more than $80 billion in additional funding, the stakes for ACA non-compliance are high.
What’s more, the IRS is expected to continue its use of levy power to satisfy outstanding ACA penalties. Thus, the risks of non-compliance go beyond monetary fines — you could also lose your property.
Examining IRS Levying Power
An IRS levy permits the legal seizure of property to satisfy a tax debt. The agency can take money from financial accounts, seize and sell your vehicle(s), real estate, and other personal property.
The IRS is currently using its levy power to collect outstanding Letter 972CG penalty assessments. The agency issues Letter 972CG penalties to employers that filed their ACA information but did so after the IRS deadlines established in IRC Section 6721. So, if you failed to file your 2023 ACA returns a few weeks ago, you could be getting a late penalty.
But Letter 972CG penalties aren’t the only fines that can result in having your property levied against you. The IRS also uses its power to levy with respect to Letter 5005-A and Letter 226J penalties.
Letter 5005-A is sent to employers that did not file their ACA Forms 1094-C and 1095-C with the federal tax agency under IRC Section 6721 and/or failed to distribute Form 1095-C to employees under IRC Section 6722.
As a precursor to issuing these penalty assessments, the IRS sometimes sends the warning notice, Letter 5699 to determine if employers failed to file or distribute their ACA information as required.
Letter 226J is sent to employers identified as having failed to comply with the ACA Employer Mandate, which requires Applicable Large Employers, or employers with 50 or more full-time employees and full-time equivalent employees to:
- Offer Minimum Essential Coverage to at least 95% of their full-time employees and their dependents whereby such coverage meets the Minimum Value.
- Ensure that the coverage for the full-time employee is affordable based on one of the IRS-approved methods for calculating affordability. The IRS is now examining how organizations determine full-time equivalent employees, which affects who qualifies for coverage under ACA.
Currently, the IRS is issuing Letter 226J penalty assessments for the 2021 tax year.
If you haven’t received a penalty notice from the IRS, you may still get one if you haven’t complied with the ACA’s Employer Mandate requirements.
Comply and Avoid ACA Penalties
ACA compliance is growing more challenging every year. With changing affordability thresholds, new 1095-C codes, changes in ACA healthcare, an influx of Premium Tax Credits, and additional state ACA reporting requirements, managing the ACA on your own is difficult.
Even with standalone ACA software, organizations are left to their own devices for proving, substantiating, and demonstrating sound ACA compliance processes to the IRS in the event of an inquiry or audit. In fact, Trusaic research finds that nearly 73% of surveyed organizations find managing ACA compliance somewhat or overly burdensome.
Employers keen on minimizing IRS enforcement should acknowledge the weight ACA compliance carries and the consequences of ignoring it. Failing to get it right could legitimately cost you your business.
Best practices for achieving 100% compliance encourage outsourcing it to an ACA vendor with a proven track record of success. Trusaic’s full-service solution, ACA Complete has saved clients over $1 billion in ACA penalty assessments.
Allocate your staff’s valuable time and resources to priorities that will generate growth for your business and leave ACA compliance to Trusaic.
