New TIGTA ACA Assessment Indicates IRS Fines are on the Way

IRS Letter 226J

While employers have been working diligently to understand and comply with the Employer Shared Responsibility Provision of the Affordable Care Act (ACA), the Internal Revenue Service (IRS) has been stretched to implement processes and tools to identify non-compliant employers. We learned they were making strides in this regard with the release of Letter 5699 earlier this year, and now we know even more about their progress.

In a recently-released audit and report completed by the Treasury Inspector General for Tax Administration (TIGTA) titled, “Affordable Care Act: Assessment of Efforts to Implement the Employer Shared Responsibility Provision” (and the accompanying press release), we’ve learned that while there have been obstacles, the IRS is moving much closer to full enforcement. In their Assessment, TIGTA made seven recommendations to IRS management. Six of seven recommendations gained agreement from the IRS.

Employers should understand the implications of recommendation seven in the Assessment: “Ensure that Forms 1094-C and 1095-C management reports correctly report error statistics.” The Assessment explains that the IRS had developed an “ACA Compliance Validation (ACV)” system to identify non-compliant Applicable Large Employers (ALEs) subject to Employer Shared Responsibility payment under section 4980H in tax year 2015. While the implementation of this post-filing compliance system was initially scheduled for January 2017, the Assessment says it will now be implemented in May 2017.

So what does this mean for employers?

  • The IRS has plans in place to overcome challenges that were preventing the identification of non-compliant employers. The implementation of the ACA Compliance Validation system is just around the corner in May 2017. Additionally, the report outlines various enhancements and improvements made to other systems.
  • The end goal is to collect fines from non-compliant employers. The audit by TIGTA makes it clear that the IRS is putting new processes and systems in place in an effort to effectively identify and collect payment from non-compliant ALEs.
  • Now is not the time to risk noncompliance. Employers should not consider this a time to “wait and see” what happens next. Rather, now is the time to make sure reporting is properly completed for prior tax years and that processes are in place to be ACA-compliant for 2017 and beyond.

If your organization needs support with reporting for the current tax year or prior tax years, Equifax can help. Please contact us to speak with one of our specialized ACA team members.