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Home ACA Compliance Preparing Your 2016 ACA Forms – Better Late Than Never

Preparing Your 2016 ACA Forms – Better Late Than Never

2 minute read
by Joanna Kim-Brunetti

Now that the dust has settled that the Patient Protection and Affordable Care Act (ACA) is here to stay and the 2016 ACA reporting deadline is just behind us, employers may be thinking that they are already too late to complete their reporting. Think again. It is still better late than never.

As background, the ACA requires that businesses with 50 or more employees must offer healthcare coverage to at least 95% of their full time employees or face potential penalties of around $2,000 per employee if at least one of them goes onto a healthcare exchange and obtains a tax subsidy, even if such coverage is offered. If that coverage does not satisfy minimum value and/or affordability requirements, businesses face potential penalties around $3,000 for each employee that gets a tax subsidy from a healthcare exchange.

To verify such compliance, the IRS requires such businesses to report their healthcare offer status for each full time employee through the 1094 and 1095 schedules. The latter schedule must be furnished to the applicable employee and filed with the IRS. Although the furnishing deadline for 2016 reporting was extended from January 31, 2017 to March 2, 2017, the corresponding filing deadlines remain at February 28, 2017 for manual filing and March 31, 2017 for electronic filing.

Failure to comply with these reporting deadlines will result in significant additional penalties under IRC Sections 6721 and 6722. These reporting penalties can reach $260 per return (which is on an employee basis), which can add up to more than $6 million for combined filing and employee statement distribution failures. Also, the penalties are doubled for willful failures, for which the employer bears the burden to show that any failure to comply was despite reasonable diligence.

The good news is that these penalties can be reduced. If the ACA reporting is filed late but within 30 days after the filing deadline, the reduced penalty can be $50 per return, less than 1/5 the maximum (without willful failure). If the ACA reporting is filed after the 30 day window but by August 1st, the reduced penalty can be $100 per return. Although these reduced penalties can still add up quickly based on the number of returns, they are still only fractions of the maximum penalty of $260 per return, and the $520 per return for willful failures. In other words, even though the deadlines have passed, there is still opportunity to reduce the potential reporting penalties.

Notably, in IRS Notice 2016-70, the IRS indicated that it would provide for “good-faith transition relief” from these reporting penalties for the 2016 reporting year. However, this transition relief appears to be unavailable for those employers who fail to file or filed late. Moreover, to take advantage of this transition relief, the employer must show that it made a good faith effort to comply, including whether the employer made reasonable efforts to prepare for ACA reporting, and will take into account the extent to which the employer is taking steps to ensure that it will be able to comply with the reporting requirements for 2017.

We’re committed to helping companies reduce risk, avoid penalties, and achieve 100% ACA compliance. For questions about the ACA contact us here.

Summary
Preparing Your 2016 ACA Forms – Better Late than Never
Article Name
Preparing Your 2016 ACA Forms – Better Late than Never
Description
Although the 2016 ACA reporting deadline has passed, it’s not too late for employers to complete their reporting. There's still opportunity to reduce the potential reporting penalties.
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The ACA Times
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Short URL of this page: https://acatimes.com/tim
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