This blog was last updated on June 27, 2021
After lengthy preparations for ACA processing year 2016, your ACA forms have finally been submitted to the IRS and as a filer you are ready to breathe easy. Unfortunately though for filers, your ACA duties may not yet be fulfilled. The IRS recently clarified that, although it’s a good faith filing year, filers are still required to submit Corrections in order to qualify for any “good-faith” penalty relief. Like any other information return filings, failure to file Corrections may lead to penalties under IRS section 6721 & 6722. So, now begins the next steps… One of the most common errors ACA filers may face are Tax Identification Numbers (TIN) matching errors. The ACA regulations require filers to file correct information returns, which includes reporting correct TINs of your employees, subscribers, and all other covered individuals, including dependents. The IRS will compare all names and TINs (both SSNs and EINs) to a government database to ensure a match. If the provided name on ACA forms does not match the provided TIN, the AIR system will return an error. If too many TIN Matching errors occur in one submission, it could trigger a rejection, requiring a you to file a replacement. Surprisingly, if the IRS does return TIN matching errors, the IRS does not provide the name/TIN combination that caused the error. That means for each TIN matching error, you will have to review all the name/TINs included within the affected record, which can be a difficult and time consuming process. If an error is found, you will need to file a correction as soon as possible.
I Want To File My ACA Corrections, But I Don’t Have Correct and Accurate Information. What Should I Do?
What happens if the filer does not have the correct information to file the Correction? The IRS clarified in a recent webinar that filers are not required to correct any TIN matching errors prior to obtaining a TIN from an employee or subscriber. If you are unable to correct the ACA forms before a penalty notice is issued, you will have the opportunity to establish whether good-faith relief should apply, or whether a reasonable-cause waiver applies for the 2015 penalties. To be eligible for the reasonable-cause waiver, you must first establish that the failure to include a correct TIN was due to reasonable cause. You can demonstrate reasonable cause by establishing your organization acted in a reasonable manner both before and after the TIN failure occurred and that there were either significant mitigating factors or the failure was due to events beyond the your company’s control. To establish acting in a reasonable manner, you will need to show your organization followed the TIN solicitation guidelines for ACA filings. The IRS detailed the ACA TIN solicitation guidelines in notice 2015-68 and reiterated them in the recent Corrections webinar. According to these guidelines:
- Original solicitations should be made at an individual’s first enrollment, or if already enrolled as of September 17, 2015, the next open season.
- A second solicitation should be made a “reasonable time thereafter.”
- The third solicitation should be made by December 31st of the year following the initial solicitation.
What happens if you make its solicitation and receives the same TIN information? How do you make a proper Correction? Unfortunately, these questions are still unanswered by the IRS. It makes little sense for the filer to submit corrections using the same information they provided to the IRS originally. Another unappealing option is for you to wait until you receive a penalty notice and then demonstrate reasonable cause to the IRS. That option does not necessarily guarantee that you will not be penalized for failing to file corrections.
Still Have Questions About ACA Forms and Corrections? Contact Us.
To summarize, even though 2015 is a “good-faith” filing year for ACA, penalties can still and will still apply if you do not properly follow the correction and replacement processes. TIN matching errors can follow your business for years after the initial filing. The solicitation process can be arduous, especially if as a filer, you receive TIN matching errors for records that cover families of five or more and have to figure out which record is incorrect. The ACA Correction process can be daunting. The combination of these two processes, along with the minimal IRS guidance, is just plain confusing. At Sovos, we can help you avoid this problem. Moreover, we’re here to keep you in the know so you can proceed properly to achieve full compliance.
