ACA Reporting Updates for Tax Year 2022

This blog was last updated on January 31, 2023

Affordable Care Act (ACA) reporting has started for tax year 2022. ACA reporting can quickly become complicated and costly with IRS penalties if your business does not have an efficient process in place. Although regulations have generally stayed the same for this reporting season, there are some important updates all businesses should be aware of when filing their ACA forms with the IRS this year.

The IRS requires ACA filing with the goal of knowing where each individual gets their healthcare coverage from during the calendar year. Taxpayers can get insurance coverage through one of three places:

1. ACA Marketplace (Form 1095-A)
2. Insurance company (Form 1095-B)
3. Applicable large employers (ALEs) (Form 1095-C)

Knowing this information allows the IRS to deliver penalties to applicable ALEs and determine persons who are eligible for tax credits on their individual returns. As a refresher, IRS Form 1095-C is usually filed by ALEs (generally those who employ 50 or more people), which is required under code 6056. This tax form proves an offer of minimum essential coverage (MEC) was provided to each applicable employee as required under action 4980H.

For tax year 2022, we did not see many changes from the IRS surrounding ACA tax forms. However, there are two important penalty changes to be aware of for the 2022 reporting season:

1. The 4980H(a) penalty increased from $2,700 per employee annually to $2,750. This penalty is issued when an employer does not offer the MEC to at least 95% of its full-time employees (and their dependents) for any month during the tax year, and at least one-full time employee receives a Premium Tax Credit (PTC) for purchasing coverage through the marketplace.
2. The 4980H(b) or Employer Shared Responsibility Penalty increased from $4,060 per employee annually to $4,120. This penalty is assessed when an employer fails to offer coverage that meets the affordability and minimum value requirements. This penalty is typically only issued when the 4980H(a) penalty does not apply.

For 2022 filings, the penalty for failing to file electronically, failure to provide a correct payee statement, and/or filing inaccurate information is $290 per return (with a maximum of $3,532,500 per calendar year). As a reminder, ACA Reporting Forms 1094-C and 1095-C are due to the IRS by February 28 (if filing on paper) OR March 31 if filing electronically. All businesses required to file 250+ Forms must file electronically.

What should I prepare for the 2022 ACA reporting season?

We’ve compiled a few key tips to help you prepare for ACA reporting:

1. Ensure your data is accurate. Doing a cleanse of your data can help eliminate errors when transmitting, which often lead to costly penalties.
2. File electronically to ensure you have enough time to accurately report your data. The due date for Forms 1094-C and 1095-C is March 31 when filing electronically, versus February 28 for paper filings. This gives you an extra month to prepare your data for transmittal.
3. Find a solution that fits your needs. If you are a business that hovers around 50 employees, finding a solution and contract terms that allows for flexibility in your reporting from year to year is essential.
4. Confirm your business’ state reporting obligations. Since the mandate to have health insurance was removed at the federal level in 2017, many states began to administer their own requirements on healthcare. California, Massachusetts, New Jersey, Rhode Island, Vermont, and the District of Columbia all require ACA reporting at the state level, with more states expected to edict mandates in the future.

It is not too late to implement a Sovos solution to help with your ACA reporting needs. Sovos can give valuable time back to your team and simplify your ACA reporting process.

Sovos is your trusted partner in ACA reporting. With over 10 years of experience filing ACA forms, our Tax Information Reporting – ACA solution can handle all of your reporting needs, no matter how regulations change.