It’s that time of year again. Organizations that opt to paper file their ACA details for the 2023 tax will need to submit them to the IRS by today, Feb. 28, 2024 — with one caveat.
This year, ACA paper filing looks significantly different, thanks to IRS regulations that kicked in on Jan. 1. The agency reduced the amount of paper filings that organizations can submit to 10, down from last year’s 250. The rules apply not only to ACA paper submissions but also to other tax correspondence, including W-2s and 1099s.
The reduction in allowable paper filings indicates the IRS’s intention to phase out paper filing as an option for satisfying the reporting obligations of the ACA’s Employer Mandate, leaving it available for employers with unique workforces.
In fact, for the vast majority of Applicable Large Employers (ALEs), paper filing will no longer be an option because these organizations must have 50 full-time and full-time equivalent employees. And 50 full-time employees means 50 1095-Cs, with few exceptions.
The IRS paper filing cap adjustment is not new either, it’s been in progress for some time. The tax agency first proposed the change in 2021 and originally, would have reduced the paper filing cap gradually over a three-year time frame. Each year the threshold would drop from 250 before reaching 10.
This change in processing of ACA filings will help the IRS more efficiently evaluate and assess organizations’ annual submissions for tax compliance purposes. Why? Because it forces employers to file their information electronically.
While the shift to a predominantly electronic filing process is beneficial for the IRS, it’s also good news for employers.
Advantages of Electronic ACA Filings
It’s true electronic ACA filing helps the IRS more easily identify instances of ACA non-compliance, but it also provides many considerable benefits for employers. Here are the top five:
- Streamlines the Process: One of the most significant benefits of electronic ACA filing is that it can be done quickly. Instead of waiting for weeks and dealing with the hassle of mailing your filings to the IRS, uploading them online is almost instant. Plus, once you upload the electronic 1094-C and 1095-C forms, you’ll quickly get confirmation that your filings were transmitted and accepted, or not accepted, which can help you avoid costly late penalties that you might have incurred had you paper filed the information.
- Assists with Audit Preparedness: Another advantage is that filing electronically can strengthen your organization’s audit defense in the event of an IRS inquiry. Since electronic submissions have time and date stamps, your organization will be ready to challenge an IRS Letter 5699, which is issued if the agency believes your organization didn’t file its ACA information for a specific tax year.
- Improves Data Quality: Electronic filing enables employers to review and fix ACA filings found during the submission process. For example, if your fillings contain the former last name of an employee who was recently married, submitting the relevant 1095-C electronically will prompt the IRS portal to highlight the discrepancy with the Social Security Administration’s database. This chance to identify and correct such information ensures more accurate reporting while also providing an opportunity to enhance data quality.
- Provides More Time: Another obvious benefit of filing ACA details electronically is that it offers employers extra time to fulfill their ACA reporting obligations each year. While the paper filing deadline is traditionally on February 28, the electronic filing deadline is a month later, usually falling on March 31. This additional time allows employers to carefully review their 1094-C and 1095-C information before submitting it to the IRS.
- Strengthens Compliance: The above benefits are an opportunity to improve ACA compliance efforts. This is especially true when deploying a software solution for managing ACA compliance and transmitting the 1094-C and 1095-C forms to the IRS. Trusaic’s ACA Complete, for example, houses all of the relevant ACA details in a cloud-based application that businesses can access from anywhere with an internet connection. And since ACA Complete seamlessly integrates with major HCM systems such as WorkDay, SAP, and ADP, businesses can directly pull benefits and enrollment information into the system before filing details with the IRS. This streamlines the process and reduces the likelihood of errors during filing. It also saves HR teams an enormous amount of time, which our research indicated was a top concern among professionals with regard to ACA filing each year.
Get Help With ACA Reporting
As a reminder, ACA paper filings of forms 1094-C and 1095-C with the IRS are requirements of the ACA’s Employer Mandate.
Under the ACA’s Employer Mandate, ALEs must offer Minimum Essential Coverage to at least 95% of their full-time workforce and their dependents whereby such coverage meets Minimum Value and is affordable for the employee or be subject to Internal Revenue Code Section 4980H penalties.
Failing to comply with the aforementioned requirements can lead to penalty assessments via IRS Letter 226J, which the IRS is currently issuing for the 2021 tax year.
For assistance with ACA filing for 2023 or ACA compliance efforts moving forward, contact Trusaic.
We’ve helped thousands of clients streamline their ACA compliance responsibilities with ACA Complete, which removes the burden of tracking offers of coverage, implementing measurement methods, and ensuring data quality. On top of that, the solution has helped new clients prevent over $1 billion in ACA penalty assessments.
To find out more information about 2023 ACA filing deadlines, to be met in 2024, download the ACA 101 Toolkit below.
