IRS Enforcement of the ACA Not Wavering
2 minute read:
Give the IRS credit. It is consistent.
In 2017, the federal tax agency responded to an inquiry about waivers to business owners from U.S. House Representative Bill Huizenga. In 2017, Rep. Huizenga asked the IRS about the possibility of receiving the waiver of an ACA penalty for an employer that had not complied with the ACA by not offering required health insurance to employees for financial and religious reasons. The IRS responded there was no provision in the ACA that allows for a waiver of penalties.
Two years later, the IRS has provided the same response to another member of Congress. U.S. Senator Susan Collins submitted an inquiry asking if an ACA penalty for an organization can be waived or reduced based on hardship or other factors. Collins also inquired about transition relief for employers with less than 100 employees.
The IRS responded with Letter 2019-0008 from the IRS Office of Chief Counsel. In the letter, Victoria Judson, Associated Chief Counsel, stated that the ACA does not provide for a waiver of ACA penalties. Additionally, Judson said that transition relief is not available to employers after the 2016 tax year. “The legislative provisions of the ACA are still in force until Congress changes them,” stated Judson. “Therefore, taxpayers must follow the law and pay what they may owe.”
Employers interested in viewing the IRS letter sent to Sen. Collins can do so by clicking here.
This correspondence is further proof of the IRS’s commitment to enforcing the ACA. In fact, IRS enforcement efforts are intensifying. The IRS has begun sending Letter 972CG penalty notices to employers who filed their ACA information, but did so after the IRS deadlines established in IRC Section 6721.
This is in addition to the IRS continuing to issue Letter 226J to employers for failing to comply with the ACA Employer Mandate, which requires employers with 50 or more full-time employees and full-time equivalent employees 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.
The IRS also is issuing IRS Letter 5005A. This penalty notice is sent to employers who 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 sent Letter 5699 to determine if employers had failed to file or distribute their ACA information as required.
If you haven’t received a penalty notice from the IRS, you may still get one if you haven’t complied with the requirements of the ACA’s Employer Mandate. Undertaking an ACA Penalty Risk Assessment can tell you if your organization is at risk of receiving ACA penalties from the IRS. Some third-party vendors will undertake this assessment at no cost to your organization.
If your organization has received IRS Letter 226J for the 2017 tax year, download this guide to prepare your response to minimize additional penalty assessments.
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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