This blog was last updated on March 30, 2017
Sovos recently partnered with the Society for Human Resource Management (SHRM) to host an informative webinar detailing Affordable Care Act replacements and corrections. The webinar was a success for everyone involved and we received a number of important and thought-provoking questions.
Two of our tax gurus, John Kreger and Gerry Nelligan, provided answers to some of the questions they thought were most relevant and timely.
John Kreger
Q: For the identifying individuals are you able to tell which covered individual the error is for or just that it is a covered individual not the employee?
A: Due to the changes provided by the IRS this year, we are able to track the order in which the covered individuals were included in the original file and match that up with a new indicator included in the IRS response. This allows us to tell with certainty which individual the IRS is taking issue with.
Q: Can we make changes to individual forms and submit them? I accidently entered the wrong cost and it may affect 2 of my employees. I have corrected the main IRS filing to the correct amount. May I send in the two corrections?
A: Yes. Our software allows you to make changes to whatever forms you wish to within the system. If the form has previously been transmitted or printed, you will be asked if want to flag the records to be included in a future print or transmittal. Then when creating a print or transmittal output, the system will only include the changed records.
Q: File was accepted with errors. Once errors are corrected, need to submit ONLY those that had errors. How does one submit ONLY those that had errors. Example: total file was 4,307 records; 233 had errors. How do you submit the 233 corrections?
A: In our software, when you change the records, they are flagged as being corrected records. When you have fixed all the records you are able to, you are able to generate a Correction transmittal that only includes records with this corrected flag.
Q: Does your system write “Corrected?”
A: If a record is changed after it was printed, but before it was transmitted to the IRS, we mark the forms with the word “Corrected” when printed. If the record is changed after it was transmitted, we mark the forms with the checkbox checked “corrected” when printed.
Q: My understanding has been that an incorrect first name would not trigger AIRTN500 (Robert vs. Bob). Several articles I’ve read suggest the match is based on SSN and the first four letters of the last name. Is this correct?
A: This is a correct understanding of how the process is supposed to work. With our software, at the time of transmittal, we pull the first 4 characters of the last name and place it in the “name control” field of the xml record.
Q: Does the IRS reject TIN numbers for dependents if their names are wrong? i.e. Bob instead of Robert
A: If the software package being used calculates and sends the “name control” field correctly, this should not happen (in our understanding).
Q: If those TIN mismatches come back but they are no longer employed do we need to try to get the correction from them?
A: Yes. The IRS expects you to solicit this individual to get the correct name/TIN combination. If the IRS assesses penalties for the inaccurate data, records of your attempts to solicit the individual will serve to help abate these penalties.
Q: We have two employees we have verified SS number with the SS agency although it is being rejected in the ACA filing process. What is the next step we should take?
A: In this situation, it’s difficult to determine the next steps as the IRS doesn’t appear to be using the exact list provided by the Social Security Administration. It would be beneficial to verify that the individual’s last name is being sent to the IRS correctly in the “name control” field of the XML file.
Gerry Nelligan
Q: If an employee begins full time on February 15, and is in a waiting period for that month for insurance to start on March 1, on the 1095 form, would an employer put 1H in line 14 and then 2D during the month of February to show that they were in their waiting period?
A: This is correct. An ALE Member offers health coverage for the month only if it offers health coverage would provide coverage for every day of that calendar month. So in this situation code 1H would be used on line 14. There are a couple of code series 2 codes that may seem appropriate, but Code 2D should be used when it’s in a 4980H(b) Limited Non-Assessment Period, which it is here, rather than Code 2B (employee not a full-time employee for the given month) or Code A (not employed during the month), which should be used if employee was not an employee for any day during that month.
Q: If shareholders are 2% or more of the company are enrolled insurance through the company, do they still receive a 1095-C form?
A: According to the 1095-C instructions, the definition of an employee does not include “an S corporation shareholder who owns at least two percent of the S corporation.”
Q: If a group if fully insured, then is it correct that they do not have to fill out Part III of the 1095-C form with dependent information?
A: That is correct, that information could be reported on the 1095-B.
Q: Do we use the same TCCs as last year? Once you have one, is it always the same or do you need to reapply each year?
A: You do not need to apply for new TCCs, but you may need to update your application.
Q: What is the official first deadline to transmit to the IRS? When should employees get their 1095 form?
A: The due date for furnishing forms to recipients was March 2, 2017. The due date was originally January 31, but it was extended on November 30. The due date to transmit the forms to the IRS is March 31, 2017. If filing via paper the due date was February 28.
Q: How do we handle employees that only worked for a few days (i.e., less than a week or two)?
A: The requirement is to offer coverage and report for all full-time employees. A full-time employee under IRC section 4980H is defined as an employee who averaged at least 30 hours of her per week. If the employee works less than this the employer does not have to offer coverage and does not have report for them. A form 1095 must be filed if the employee was considered a full-time employee for at least one month.
Q: Will the insurance companies provide 1095-B for self insured ALE as well as fully-insured?
A: No if this is a self-insured plan the only form the individual will receive is the 1095-C.
Q: Do we need to send a test file again? or if we did that last year can we just send the regular file? Do we need to call to switch to production again?
A: Software Developers, who passed AATS for Tax Year 2015, will not have to retest for Tax Year 2016. Transmitter Control Codes (TCC) will remain in Production status. New participants will need to comply with test requirements for Tax Year 2016. Software Developers need a new Software ID for each tax year and each ACA Information Return Type they support. The software information must be updated yearly on the ACA Application for TCC.
Q: What code do we use on line 14 and 16 for Retiree’s that continue insurance, but are no longer employed?
A: Generally an ALE Member should use code 1H, No offer of coverage, on line 14 for any month that the former employee was offered COBRA continuation coverage. For those same months, the ALE Member should use code 2A, Employee not employed during the month, on line 16 for each month in which the individual is not an employee (regardless of whether the former employee enrolled in the COBRA continuation coverage).
Take Action
Watch the original webinar on-demand and download the slides here for answers to more of your questions about ACA replacements and corrections.
The best way to deal with replacements and corrections is to avoid them altogether. Sovos ACA tax reporting software will ensure accurate and rapid reporting every time. Learn more here.
