IRS Still Moving Forward with ACA Compliance Enforcement for Employers
The IRS recently issued Notice 2017-38, which revealed the results of the Treasury Department’s review of all “significant tax regulations” per President Trump’s Executive Order 13789 issued in April 2017.
Treasury did an extensive review of tax regulations and found eight that it believed met the criteria of the President’s executive order. Interestingly, none of the eight included the ACA-mandated filing requirements for employers. Perhaps the Affordable Care Act (ACA) was outside the scope of Treasury’s review because it is overseen by the Department of Health and Human Services.
However, it is clear that the IRS has a mandate to receive and review filings of employers to determine if they have met their obligations under the ACA, and is charged with enforcement of the ACA penalties for failure to do so. And all signs point to the IRS being prepared to enforce the employer shared responsibility mandate of the ACA.
This recent notice alone might not catch one’s attention, but combined with other information on the ACA provided so far by the IRS, all indications are that by December 2017, the IRS could be sending enforcement notices to inform businesses with 50 or more employees – referred to as Applicable Large Employers or ALEs – what they owe for failing to comply with the employer shared responsibility mandate.
Here is what we know:
- The IRS, since January has been contacting certain entities that were identified as non-filers to determine if they are required to file.This letter, referred to as IRS letter 5699, has been circulated on the web. This letter is separate from the letter that will be sent about penalty payments related to ACA non-compliance.
- Information on the IRS website includes the following statement:
“Legislative provisions of the ACA law are still in force until changed by the Congress, and taxpayers remain required to follow the law and pay what they may owe.”
- The IRS explains the process of determining if an ALE is not in compliance with ACA requirements. The IRS also provides information on timing.
“The contact for a given calendar year will not occur until after both the due date, including extensions, for employees to file income tax returns for that year and the due date, including extensions plus a reasonable time for corrections based on errors identified by the IRS during processing, for ALEs to file Forms 1094-C and 1095-C.”
“The IRS expects that the letters informing ALEs that filed Forms 1094-C and 1095-C of their potential liability for an employer shared responsibility payment for the 2015 calendar year (with reporting in 2016) will be issued in 2017.”
- IRS staff has indicated that it could take 18 months from the IRS filing deadline for the previous reporting year before potential liability letters are issued. With the filing deadline for the 2015 reporting year occurring on June 30, 2016, that would mean the earliest we might see letters is December 2017.
Another sign that letters are being prepped will be guidance published in the Internal Revenue Bulletin that describes the procedures for submitting the employer shared responsibility payment. The IRS has stated that this guidance will be available before sending any letters to ALEs for the 2015 calendar year.
Here’s the link to the complete Q&A, which the IRS has confirmed is still considered to be the most current information available addressing ACA compliance.
If you are a business with 50 or more employees that has not filed its 2015 ACA information with the IRS, you should file the status of your healthcare offers to each full-time employee using IRS Schedules 1094 and 1095 as soon as possible to minimize your potential IRS penalties.
And although you will have missed the March deadline for filing 2016 information, filing that information with the IRS before August 1 can mean a significantly lower filing penalty.
The discussion about ACA repeal and replace is far from over. Indeed, on July 7, 2017, the IRS released version 1.0 of the 1094-C and 1095-C electronic filing schemas for 2017, contemplating that the IRS continues to march forward with ACA for the 2017 reporting year.
Until something is decided and begins to take effect, the ACA remains the law of the land. And all signs continue to point to the IRS enforcing the ACA’s employer shared responsibility mandate.
The clock continues to tick.
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