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Earlier this year, the IRS started issuing in Letter 972CG ACA penalties to employers who filed their annual ACA information past IRS deadlines established in IRC Section 6721.
We understand that the IRS is not issuing any extensions on these penalty notices, consistent with the crackdown on extension requests the IRS has made for employers responding to the IRS Letter 226J penalty notice. This notice to employers that fail to comply with the ACA’s Employer Mandate under IRC 4980H.
Employers have 45 days from the date issued on Letter 972CG to respond to the penalty notice.
Employers that received the penalty have three options to respond:
1) If the IRS shows an incorrect filing date in the notice, you may be able to correct the filing date to receive a reduced penalty.
2) If the 1095-C form count in the penalty notice reflecting the number of full-time employees was overstated by the employer, you may be able to provide corrected information to receive a reduced penalty.
3) If the IRS information, such as the filing date and 1095-C form count, is correct, the employer can ask the agency to reduce the penalty because of reasonable cause that establishes that the employer acted in a responsible manner and that there were significant mitigating factors with respect to the failure to file on time beyond the filer’s control. Seeking a reduced penalty on the basis of reasonable cause can be the most difficult of these three approaches.
The requirements to claim reasonable cause are steep. The situation must be significant. For example, circumstances such as floods, deaths, and acts of god would be sufficient. The dog ate my homework is not going to cut it.
To make matters worse, the IRS has also started using its levy power to take property if employers fail to pay the ACA penalties. An IRS levy permits the legal seizure of property to satisfy a tax debt. The agency can take money in financial accounts, seize and sell your vehicle(s), real estate and other personal property.
Under the ACA’s Employer Mandate, Applicable Large Employers (ALEs) (organizations with 50 or more full-time employees and full-time equivalent employees) 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 (MV) and is Affordable for the employee or be subject to Internal Revenue Code (IRC) Section 4980H penalties.
Employers should note that the IRS has not issued any extensions for furnishing 1095-C forms to employees for the 2019 tax year by January 31, 2020. Employers will need to act quickly to meet the early 2020 deadline. Other deadlines to note are February 28, 2020, for the paper filing of 1094-C / 1095-C schedules for 2019 with the IRS and March 31, 2020, the deadline to file 1094-C / 1095-C schedules for 2019 if electronic filing with the IRS.
To get a complete overview of ACA compliance process for 2019, click here.
Employers that contact Trusaic by November 30 will have their 2019 ACA compliance needs completed by IRS deadlines using Trusaic’s ACA CompleteSM solution. You can learn more by clicking here.
We’re committed to helping companies reduce risk, avoid penalties, and achieve 100% ACA compliance. For questions about the ACA contact us here.