Despite what you may have heard, the Affordable Care Act (ACA) tax reporting requirements are not dead. In fact, enforcement of the Employer Shared Responsibility Provisions (ESRPs) under IRC 4980H is very much alive at the federal level. And states are enforcing the individual mandate.
Federal Enforcement of ESRPs
Many employers and other filers of ACA tax information thought there would be no enforcement of the ACA since the climate towards ACA changed drastically under the current administration.
However, in the Spring of 2018, the IRS sent out over 10,000 Letters 226-J to employers related to the failure to offer minimum essential coverage to at least 95% of full-time employees for the 2015 calendar year. Last fall, the IRS issued another round of penalties related to the 2016 calendar year.
Earlier this year, Senator Collins (R-Maine) wrote a letter to Commissioner Rettig, asking the IRS to waive or reduce penalties associated with the ESRP and IRC 4980H. In his response, the Commissioner pointed out that the law does not allow for a reduction or waiver of those penalties and the only relief provided by the ACA Executive Order from President Trump was related to the individual mandate to have health care coverage.
States Enforcing the Individual Mandate
The federal government suspended the enforcement of the individual mandate to have health care coverage. However, the states continue to enforce it.
Massachusetts had an individual mandate requirement long before the ACA was enacted and maintains this requirement through reporting they receive of Massachusetts form MA 1099-HC.
This year, New Jersey adopted the individual mandate requirement. It intends to enforce that via matching federal forms 1095 to individual income tax returns. The state enacted requirements for NJ employers to report forms 1095-B and 1095-C directly to NJ by March 31, 2020. The state will follow the IRS formats for providing data, and will accept a file containing all forms 1095 filed by the employer with IRS, even when their may be recipients within the data that are not NJ residents.
Washington DC followed New Jersey’s lead, enacting the individual mandate and requiring DC employers to submit forms 1095 to them directly by June 30, 2020 for tax year 2019. In later years the returns will be due to DC 30 days after the federal due date. Unfortunately, DC was not as lenient as NJ in implementing the requirements. The published requirements for 2019 reporting of ACA information to DC do not specifically allow filers to submit forms 1094 or 1095 for any recipients that are not residents of DC. This means that filers will need to create a separate file of forms that only includes DC residents in order to achieve compliance.
California, Rhode Island and Vermont jumped into the fray not long after DC. Requirements have yet to be published as the first year of reporting will be for the 2020 calendar year.
An Extension from the IRS
This month, the IRS released Notice 2019-63 and extended the print and mail dates for the 2019 calendar year for reporting forms 1095-B and 1095-C to March 2, 2019. This is 30 days later than the original January 31st due date. The reason for the extension is that a substantial number of employers, insurers and other providers of minimum essential coverage need additional time beyond January 31, 2020 to prepare returns related to the 2019 season.
The IRS also included an additional provision that allows filers of forms 1095-B to forego printing and mailing recipient statements for the 2019 calendar year provided they adhere to the following two requirements:
- The filer must display a prominent notification on their website indicating how a recipient may request a copy of form 1095-B from the organization;
- And the filer must provide the form 1095-B to the recipient within 30 days of the request.
While this sounds like relief, it may not be. This is because:
- Filers have to be cognizant that states are moving towards a direct-filing obligation for forms 1095. And those requirements do not always follow IRS formats and due dates. Filers who elect to wait to send recipients statements until the IRS extended deadline will need to take into account the states that may require their recipients to receive those statements by January 31st.
- The extension does not apply to forms 1095-C. This means filers of both forms will have to create a separate process to issue forms 1095-C from form 1095-B, which is more difficult than it sounds.
- Posting the notification, monitoring for requests for statements, printing and mailing statements individually as requests come in and ensuring requests are fulfilled within the 30-day timeframe may cost your organization the same or more resources than the original process.
Penalties for Late Filing
The IRS is also enforcing the 972CG penalties for filing forms 1095-B and 1095-C after the deadline, which may be contributing to the extension this year.
In the Spring 2018, the IRS issued over 10,000 penalty notices to filers who filed forms 1095-B and/or 1095-C after the required due date for calendar year 2015. Later that same year, the IRS issued another round of penalties for calendar year 2016 for the same reasons. And, in the spring of this year, the IRS issued penalties for failure to file timely statements for the 2017 calendar year. Since 972CG penalties typically run about two years behind the original filing date, we anticipate similar enforcement for calendar year 2018 to occur next year.
Notice 2019-63 is an extension of time to issue recipient statements of forms 1095-B or 1095-C. The notice did not extend the due date for filing those forms with the IRS. They remain due to be filed no later than March 31, 2020 for the 2019 calendar year.
Find out how you can ensure compliance with Sovos ACA reporting solutions.