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The IRS recently issued an extension for furnishing forms 1094-C and 1095-C to employees for the 2019 tax year, which extends the schedule employers need to keep in mind to comply with the ACA.
While that may seem like it’s well beyond the horizon, it’s a reminder that employers should keep in mind the penalties they face for not providing their ACA information by required IRS deadlines for the 2019 tax year.
That means having your forms 1094-C and 1095-C ready by February 2020 for distribution to employees and for filing with the IRS.
The updated ACA reporting schedule for the 2019 tax year, to be filed in 2020 is as follows:
● Paper file 1094-C/1095-C schedules with the IRS no later than February 28, 2020
● Furnish 1095-C schedules to your workforce no later than March 2, 2020 (original deadline was January 31, 2020)
● Electronically file 1094-C/1095-C schedules with the IRS no later than March 31, 2020
Failing to meet these deadlines can result in penalties under IRC 6721/6722.
For the 2020 tax year, the penalties for employers with average gross receipts of more than $5 million in the last 3 years are:
Failure to file correct information returns.
If employers file ACA information to the IRS after the March 31, 2020, deadline, but file within 30 days of the deadline, they could be subject to a $50 penalty per return not filed, not to exceed an annual maximum of $556,500. After 30 days and through August 1, the amount per return not filed jumps up to $110, not to exceed an annual maximum of $1,669,500. After August 1, the penalty amount steepens to $270 per return, not to exceed an annual maximum of $3,339,000. For intentional disregard, meaning the deadline was missed willfully, the penalty more than doubles after August 1 to $550 per return not filed, and there is no annual maximum limit.
Failure to furnish correct payee statements.
If the ACA-mandated health insurance information is not provided to employees by the deadlines established by the IRS, the same penalty amounts are assessed as is the case for failures to file.
The per return penalty are the same for employers with average gross receipts of $5 million or less in the last 3 years. However, the annual maximums are lower.
The IRS is currently issuing failure to furnish and file penalties by the required deadlines in Letter 972CG. Employers have 45 days from the date issued on Letter 972CG to respond to the penalty notice.
These are not the only penalties the IRS has been enforcing in regards to the ACA. IRS Letter 226J penalty notices have been issued to employers for failing to comply with ACA’s Employer Mandate. 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 IRS 4980H penalties.
Penalty assessments for over $4.5 billion have currently been assessed for employers identified as having failed to comply with the ACA’s Employer Mandate.
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.
Organizations should consider having a cost-free ACA Penalty Risk Assessment performed to discover their potential exposure. With less than 30 days left in the year, employers can measure their ACA penalty risk before submitting their filings to the IRS.
If you’ve already received Letter 226J penalty notice, learn how to respond here.
Contact us by December 20 to ensure all your ACA reporting responsibilities can be met on time and with accuracy.
