Government Increases ACA Reporting Penalties and Provides Guidance for Extensions
Employers Face Increased Penalties for Failure to Comply with ACA Reporting Requirements
On June 29, 2015, just four days after the Supreme Court’s ruling in the King v. Burwell case that proved the Affordable Care Act is here to stay, President Obama signed the Trade Preference Extension Act of 2015 (Trade Act) into law. The Trade Act significantly increases penalties for failures related to information returns and individual statements required by the Internal Revenue Code, including ACA’s new reporting requirements on IRS Forms 1094 and 1095. The increases apply to returns and statements required after December 31, 2015, meaning that they will impact the first round of ACA reporting – significantly.
The penalty for failures in timely furnishing 1095 series statements to employees and filing 1094 series returns with the IRS are increasing from $100 to $250 per return for which such failure occurs. The total penalties imposed for all failures during a calendar year cap are increasing from $1.5 million to $3 million. However, there is a “break” for corrected forms.However, there is some relief. Extensions of the deadlines for furnishing and filing may be available upon employer request.
Earlier this month, the IRS published draft instructions for Forms 1094/1095-C for the 2015 tax year. The draft contains specific instructions on how employers may request an extension of the deadline to furnish 1095 statements to recipients; however, it’s important to note that extensions are not a sure thing. The approval of an extension to furnish 1095 statements is at the discretion of the IRS and cannot be guaranteed. Employers may request an extension of time to furnish the statements to recipients by sending a letter to Internal Revenue Service, Information Returns Branch, Attn: Extension of Time Coordinator, 240 Murall Drive, Mail Stop 4360, Kearneysville, WV 25430 including (a) filer name, (b) filer TIN, (c) filer address, (d) type of return, (e) a statement that extension request is for providing statements to recipients, (f) reason for delay, and (g) the signature of the filer or authorized agent. The request must be postmarked by the date on which the statements are due to the recipients. If the request for an extension is approved, generally a maximum of 30 extra days will be granted to furnish the recipient statements.
In addition, employers may request an automatic extension of the March 31, 2016 deadline to file a 1094-C with the IRS by completing Form 8809 (Application for Extension of Time To File Information Returns). The IRS has recently updated the form to include checkboxes for extension requests for transmitting Forms 1094-C, 1095-C, and 1095-B to the IRS.
To learn more about ACA reporting requirements and extensions, please visit www.irs.gov.
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