Every year employers must file their ACA information via forms 1094-C and 1095-C to the IRS and any state government. For the last seven years, there have been two methods for doing this, that is until now.
A new IRS proposed rule seeks to phase out the paper-filing option by 2023, leaving it intact for only the smallest subset of employers. Specifically, the proposed rule would reduce the 250 count threshold to 100 for filings due in 2022. By 2023 and thereafter, the count threshold would decrease to an even smaller 10 filings. The proposed ruling also applies to worker forms like W-2 and 1099s.
The IRS says decreasing the number of returns threshold for paper filing will provide “time to ensure it has sufficient resources and updated programming to seamlessly handle and process the increased volume of electronically-filed information returns and the applications required to file those information returns electronically.”
Under the current regulations, employers filing less than 250 total 1095-C forms can choose to do so via the paper method. To clarify, here’s an example:
TJ’s Diner has 120 ACA full-time employees and 80 part-time employees. Since the total number of 1095-Cs to be distributed is less than 250, TJ’s Diner can elect to paper file the annual 1095-C forms with the IIRS.
If the IRS finalizes the proposed rule, employers like TJ’s Diner will need to move quickly to prepare for electronic filing submissions next year. Consider partnering with a vendor who has a track record of success with e-filing ACA information with local governments and the IRS. Trusaic’s line of ACA solutions can all meet the e-filing requirements on time and accurately.
As a reminder, organizations file ACA information to the IRS via the 1094-C and 1095-C forms as a requirement of the healthcare law’s Employer Mandate.
Under the ACA’s Employer Mandate, employers with 50 or more full-time employees and full-time equivalent employees are Applicable Large Employers (ALEs) and must:
- Offer Minimum Essential Coverage (MEC) to at least 95% of their full-time employees (and their dependents) whereby such coverage meets Minimum Value (MV); and
- Ensure that the coverage for the full-time employee is affordable based on one of the IRS-approved methods for calculating affordability.
The IRS’s move to reduce the threshold of paper filings aligns with its efforts to increase enforcement of ACA non-compliance. It also makes sense, considering the agency faced a significant paper backlog caused by COVID-19 earlier this year.
E-filing is a proven method for quickly and accurately identifying errors in ACA filing submissions. It works both ways, however, and employers have much to gain from e-filing their ACA returns, including, the quick turnaround time between submission and acceptance, an opportunity to improve their data quality and correct any identified errors before the IRS assesses a penalty assessment.
Employers not currently leveraging an ACA e-filing process should reconsider regardless of whether the rule is finalized. Assuming the IRS rule is finalized and set into motion, it will apply for the 2021 tax year, to be filed and furnished in 2022. Contact us to learn about our comprehensive ACA Complete solution. We can handle your ACA reporting, furnishing, and compliance efforts.
If you need assistance with your ACA reporting obligations this year, download the Employer’s Guide to Coding the ACA Form 1095-C.
We’re committed to helping companies reduce risk, avoid penalties, and achieve 100% ACA compliance. For questions about the ACA contact us here.