Late last week, the IRS issued the final ACA reporting instructions for the 2022 tax year, which include both the 1094-C and 1095-C forms to be filed and furnished in 2023.
The new instructions do not include a “what’s new section,” indicating that there aren’t any new changes to the forms themselves in comparison to the 2021 final forms and instructions. They do, however, reiterate recent developments issued by the IRS.
Permanent 1095-C distribution extension
The instructions confirm an automatic 30-day extension for furnishing forms 1095-C to required individuals. That means Applicable Large Employers (ALEs) have until March 2, 2023, to distribute 1095-C forms to their full-time employees. These forms must be furnished by paper mail or hand-delivered unless the recipient agrees in advance to receive a copy electronically.
Fortunately for ALEs, the automatic 30-day extension applies to every ACA reporting year from here on out. Thanks to the final regulations issued on December 12, 2022, ALEs will have until March 2, or the next business day every year to satisfy the ACA furnishing requirement.
It’s important to note however that this extension only applies to the requirement to furnish the 1095-C forms.
To receive a filing extension, whether it be for a paper or electronic submission, organizations must file Form 8809. No explanation or signature is required for the extension, but ALEs that need one should request it ASAP as the agency will typically only issue one 30-day filing extension. If you need assistance requesting an extension, contact Trusaic.
New line 14 codes forthcoming
As noted in the draft 2022 1095-C instructions, issued in July of this year, the agency has reserved Line 14 codes 1V, 1W, 1X, 1Y, and 1Z for future use. These codes will likely adopt use for future reporting years.
While there are no first-time new codes on the 2022 forms and instructions, employers should take note of the relatively new 1T and 1U codes.
The 1T and 1U codes were first introduced for 2021 reporting and relate specifically to the use of Health Reimbursement Arrangement (HRA) offers of coverage. See below for an explanation of these codes.
What is the 1T code?
ALEs should enter a 1T code on line 14 of the 1095-C form if the employee and their spouse received an HRA offer of coverage where the affordability was determined using the recipient’s primary residence zip code.
What is the 1U code?
Similar to the 1T code, the 1U code also relates to HRA offers of coverage. ALEs should code the 1U on Line 14 of the 1095-C form if the employee and their spouse received an HRA offer of coverage where affordability was determined using the individual’s primary place of employment zip code – not their primary residence.
Both codes should be used for the employee and their spouse, not their dependents. For a complete understanding of all of the 1095-C codes, view our 1095-C codes blog post.
Increased usage of HRAs
Employers would be wise to familiarize themselves with these new HRA codes. Of course, accurately coding the 1095-C forms is critical for minimizing ACA non-compliance risk, but this is even more so the case as ALEs increasingly choose HRA plans to satisfy their Employer Mandate responsibilities. Recent data shows 93% of ALEs surveyed use Individual Coverage HRAs as their sole healthcare option for satisfying their obligations to offer sufficient coverage. That’s up from 8% from the year before.
Preparing for upcoming filings
While the 2022 ACA forms and instructions are similar to last year’s, enforcement of the ACA has increased. The IRS recently received an additional $80 billion in funding and 87,000 new agents for carrying out audits. That means that we can anticipate greater scrutiny in evaluating employers’ ACA filings this year. Getting your ACA information in with the tax agency on time and accurately will be paramount for avoiding penalties.
The IRS is currently issuing 2020 non-compliance penalties via Letter 226J, as well as previous years. Furthermore, the agency recently made clear, that there would be no more good-faith transition relief. As a result, we can expect an elevated level of rigor in the agency’s review of ACA information.
If your organization is tired of managing the ongoing challenges associated with ACA compliance, outsource it to Trusaic. With our suite of full-service enterprise-grade ACA solutions, we can handle all of the responsibilities for you.
If your organization is eager to continue the process internally, we invite you to download the Employer’s Guide to Coding the 1095-C Form, to understand how to accurately code your 1095-C forms.
To gain invaluable insights on penalty amounts, affordability percentages, filing deadlines, expert tips for responding to penalty notices, and proven strategies for minimizing IRS penalty risk, download the ACA 101 Toolkit.