Good Faith Unlikely for 2021 ACA Reporting

2021 ACA reporting will most likely be different than prior years. Last fall, the IRS issued Notice 2020-76, which provided Affordable Care Act (ACA) filers with an extension of time to furnish Forms 1095-B and 1095-C to recipients. Instead of being due by the end of January, the forms could be mailed by March 2 instead. The Notice provided even further relief to insurance companies and other providers issuing Forms 1095-B in that they were no longer required to furnish the statements directly to the recipient at all. Instead, they could post a notice on their website and the recipient could request a copy if they needed one.

The Notice also extended for another season: relief from the $280/failure penalty for reporting incorrect taxpayer identification numbers on Forms 1095 under Sec. 6722.

The IRS rounded out last year’s Notice by notifying filers that the Good Faith relief granted for 2020 would likely be the last year. Specifically, the IRS indicated that it had received very few comments to the prior year’s Notice 2019-63, which it interpreted to mean that the industry no longer needed the relief. The IRS warned that if it did not receive substantial industry comments to the 2020 Notice indicating a burden, it would not be granting Good Faith relief for future tax years.

People keep asking us – what does this mean?

Furnish Forms 1095-B & 1095-C to the recipient by January 31

The statutory requirement under Sec. 6055 and 6056 is for filers to issue the Forms 1095-B and 1095-C by the end of January and to file the information electronically with the IRS by the end of March.

This means that Forms 1095-B must be issued to recipients no later than January 31, 2022. The electronic posting method that was described in Notice 2020-76 was only applicable for the 2020 returns.

This means that Forms 1095-C must be issued to recipients no later than January 31, 2022. The extension of time until early March that has traditionally been granted was only applicable for the 2020 returns.

Since the IRS has not extended Good Faith relief for 2021 season, filers need to be prepared to print and mail Forms 1095-B and 1095-C (or deliver them electronically per Publication 1179 requirements).

There is no change to the IRS filing due date. The forms remain due to be filed with the IRS no later than March 31, 2022 if filing electronically.

There is an option to submit a 30-day extension request to the IRS for additional time to file and mail your ACA documents. However, these are two separate processes – one for recipient copies and one for the copies to be filed with the IRS.

To request an extension of time to furnish the recipient copies, the IRS generally requires a filer to fax a request to the Service Center and it must include specific details. While this information is detailed for Form 1099 filers in the General Information publication in Part M; the IRS has not yet updated the 2021 version of the Publication 5223 General Rules and Specifications for Affordable Care Act Substitute Forms 1095-A, 1094-B, 1095-B, 1094-C, and 1095-C to indicate how a filer should request an extension of time to file recipient copies of the forms. Note! The IRS must approve this request in writing so be prepared to submit the request as soon as the IRS provides the 2021 publication with the updated instructions.

Requesting an IRS filing extension requires the completion and electronic submission of Form 8809 through the ACA Information Returns (AIR) system.

Name/TIN combination failures subject to 6722 penalties with 2021 returns

Under Sec. 6722, the IRS has the authority to issue penalties to filers who submit information returns with incorrect taxpayer identification numbers. The General Information publication outlines the penalties in Part O. Generally, the penalty for 2021 returns is $280/return filed with an error up to $3.426 million for large businesses. The IRS issues the 972 CG Notice of Proposed Penalty about 18 months after the date the erroneous return is filed. The filer is given an opportunity to prove that they complied with the legal requirements for collecting TIN information to be reported on tax returns. If they cannot demonstrate compliance, the IRS will assess the penalties by sending an official penalty notice with a due date.

For the 2021 season, the Good Faith relief for TIN failures is no longer applicable to Forms 1095-B and 1095-C. If the IRS identifies failures in the data submitted, two things will occur.

• The submission into the AIRS system will notify the filer that erroneous information exists. However, the errors will not be specific enough to identify exactly which TINs are invalid. Further research will need to be done offline to determine which TINs are actually affected.
• The IRS will notify the filer via the 972CG Notice of Proposed Penalty about 18 months after the original filing date. Generally, filers receive these notices in August. For the 2021 returns, filers should expect to receive a Notice of Proposed Penalty for filing failures around August 2023.