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As the IRS continues to issue Letter 226J penalty notices to organizations determined by the IRS to have failed to comply with the Affordable Care Act (ACA) for the 2015 reporting year, the IRS is also setting the groundwork for a Letter 226J process for the 2016 reporting year.
A March 2018 report from the Treasury Inspector General for Tax Administration (TIGTA) on the Affordable Care Act stated that the IRS has the data and processes in place to begin the analysis to calculate the potential penalties for the 2016 reporting year to be assessed against those organizations determined not to be in compliance with the ACA.
Now, the IRS has started issuing Letter 5699 to organizations that the IRS believes were Applicable Large Employers (ALEs) that failed to file information returns for the 2016 reporting year. ALEs are employers with 50 or more full-time or full-time equivalent employees and 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 and is Affordable for the employee or be subject to IRS 4980H penalties. The IRS requires ALEs to file information returns with the agency and provide statements to their full-time employees relating to whether they were offered health insurance and coverage to the employees (and their dependents), and if so, certain details about that health insurance coverage.
In the Letter 5699 , officially titled, “Request for Employer Reporting Offers of Health Insurance Coverage (Forms 1094-C and 1095-C),” the IRS asks employers to confirm the name the ALE used when filing its ACA information, provide the Employer Identification Number (EIN) submitted, and the date the filing was made.
ALEs that have not filed for the 2016 reporting year have the opportunity to provide their Form 1094-C and Forms 1095-C in their response to the IRS if they are not required to file electronically. Currently, employers that are required to file at least 250 Forms 1095-C must file electronically. The IRS is currently considering changes to its rules to expand the number of employers that must file their ACA information electronically in the future.
Additionally, ALEs that have not filed can commit to filing Form 1094-C and Forms 1095-C by a specific date, preferably within 90 days of receiving the IRS letter.
The IRS will also provide employers with the opportunity to make a case as to why they should not be considered ALEs in the 2016 calendar year or to provide some other explanation as to why they have not filed.
Once the IRS has gone through this Letter 5699 exercise, we can expect the agency to start issuing Letter 226J penalty notices to those employers that are determined to be non-compliant with the ACA for the 2016 reporting year. The IRS began sending ALEs Letter 226J notices for the 2015 reporting year in November last year. It’s anticipated that the new Letter 226J notices will be issued starting this fall. The IRS is currently processing the 2017 reporting year ACA filings. Expect that compliance enforcement for the 2017 reporting year to start sometime next year.
With that information, the message could not be clearer.
Employers with 50 or more full-time or full-time equivalent employees that have not filed their 2015, 2016 or 2017 tax year ACA information with the IRS should file as soon as possible using IRS Schedules 1094-C and 1095-C to minimize potential IRS penalties.
The IRS has made it clear that there will be no waivers provided for ALEs that have not filed their ACA information.
If you haven’t begun tracking the ACA-related data for the 2018 tax year for filing with the IRS, it’s time to start.
We’re committed to helping companies reduce risk, avoid penalties, and achieve 100% ACA compliance. For questions about the ACA contact us here.