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Home ACA Compliance How to Comply With the IRS’ More Detailed Information Requirement in Audits

How to Comply With the IRS’ More Detailed Information Requirement in Audits

2 minute read
by Maxfield Marquardt

The IRS is remaining diligent with its enforcement of the ACA’s Employer Mandate

The ACA enforcement agency is requesting more detailed information from employers undergoing audits. Specifically, it seeks comprehensive calculations for determining ACA full-time and full-time equivalent counts. 

Cross- Referencing Filings and Full-Time Employee Counts 

The IRS is now cross-referencing employers’ previous years’ ACA filings to validate claims of potential non-compliance in the new penalty assessment notices. For instance, if an employer filed three Forms 1095-C for the 2018 tax year but had previously reported a higher number of full-time employees in their 2017 filings, the IRS would request detailed full-time employee calculations to explain the discrepancy. 

This is a change from previous penalty issuance practices and places the burden on employers to prove their full-time and equivalent employee counts.

This new development poses significant challenges for employers that have relied on self-serve ACA tools within their payroll or benefits administration systems. Substantiating full-time employee counts becomes particularly challenging without a robust approach to accurately track and document employee details. It’s critical for employers to take prompt action when receiving these notices from the IRS.

Calculate With Confidence 

To ensure accurate calculations, employers must understand the definitions of ACA full-time and full-time equivalent employees. ACA full-time employees are those who average at least 30 hours each week or 130 hours each month. Full-time equivalent employees are a combination of part-time employees whose total hours, when aggregated, are equal to a full-time employee.

Additionally, the IRS is now requesting proof of ACA full-time calculations in audits. This further underscores the significance of doing so with the correct methodology. 

CTA: Stay On Top of Your Employer Mandate Responsibilities 

Employers should calculate and document their full-time and full-time equivalent employees for each month of the prior year to determine their Applicable Large Employer (ALE) status. These counts are also critical for filing and furnishing Forms 1095-C annually. It’s important to note that full-time equivalent employees do not require a 1095-C form.

Best Practices for Documentation and Defense
Employers can navigate a more stringent IRS auditing process by adopting some basic best practices when it comes to documenting ACA calculations. 

  • Accurate Employee Classification: Ensure accurate coding of employees in payroll and human capital management platforms. Detailed information such as hours worked, job title, location, hire dates, designation, and worker classification is crucial for determining full-time employee status.
  • Digital Storage of Employee Details: Store ACA-related employee information digitally for easy retrieval and efficient defense. Review and synchronize data across all platforms regularly to prevent discrepancies during ACA filing season.
  • Monthly Monitoring: Establish a routine process to monitor ACA compliance monthly. Review new hires, verify employee hours worked, and ensure accurate entry of employee information. This proactive approach prevents a last-minute scramble and ensures timely offers of coverage to avoid penalties.

Given the complexities of ACA compliance and the increased focus by the IRS, partnering with an ACA compliance vendor can alleviate the burden on internal staff, minimize penalty risks, and maximize compliance. Expert solutions can handle tasks such as monthly monitoring, data cleanup, annual filing, offer tracking, and health plan alignment with IRS requirements.

The IRS’s heightened focus on obtaining detailed information in ACA audits reflects a shift in their enforcement strategy. Employers must be prepared to substantiate their full-time and full-time equivalent employee counts during audits. 

By adhering to best practices and partnering with ACA compliance experts, organizations can navigate the complexities of ACA compliance and minimize penalty risks.

Summary
 How to Comply With the IRS’ More Detailed Information Requirement in Audits
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How to Comply With the IRS’ More Detailed Information Requirement in Audits
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With heightened IRS ACA enforcement activity, employers must be prepared to substantiate their full-time and full-time equivalent employee counts during audits.
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https://acatimes.com
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