This blog was last updated on June 27, 2021
On June 29th, an update was passed to the Trade Preferences Extension Act. Not only are all 1099 filers affected, but incorrectly reporting tax information on the new Affordable Care Act required 1094/1095 forms will also be subject to these newly enhanced penalties. Affordable Care Act Reporting Implications This penalty update directly affects the new 1094/1095 Health Care ACA forms, even though sections 6721 and 6722 of the IRS code traditionally relate only to 1099 & W-2 information returns. How? Sections 6055 and 6056 of the IRS code, which govern minimum essential healthcare coverage reporting requirements, specifically reference 6721 and 6722 for penalty enforcement. This includes penalties that relate to errors, deadlines to correct said errors and other important implications regarding tax filing requirements. The IRS will enforce these new penalties unless entities can show they made a good faith effort to provide all necessary reporting information accurately. A good faith effort does not include late filings or failing to file an information return or statement. This good faith effort approach also only applies to the filings for Tax Year 2015. What Are the New Penalties? H.R. 1295, (now PL 114-27), more than doubles the penalty per record from $100/record to $250/record for failure to file properly. This update also doubles the annual maximum penalty cap from $1.5M to $3M. The new penalties are effective for information returns required to be filed after Dec. 31, 2015. This means it is essential to be ready for this tax season! What Does This Mean For 1095 Filers? This latest update adds another layer of taxpayer confusion to an ever fluctuating landscape of changes and requirements, especially since this is the first year for mandatory ACA tax information reporting. There is limited time to implement changes that will help businesses in every industry avoid filing mistakes that may trigger these new penalty amounts. Next Steps That Need To Be Taken Companies must take increased measures to ensure that new and existing vendors and employees have properly validated information for ACA forms this year. Clean data is paramount and being extra-careful about reporting is crucial towards avoiding these increased tax penalties. This legislation is far-reaching and these costly penalties can be avoided if employers have the right tools to file their forms correctly with the IRS. Sovos Compliance offers a fully integrated set of highly customizable, scalable products and services for ACA filing that can help HR and benefit departments avoid costly mistakes as well as save time and expense when it comes to complying with all reporting requirements and changes. Sovos has nearly 30 years dedicated to tax information reporting processes that help businesses continue to focus on their business goals as opposed to spending valuable time and resources chasing the complexities of the IRS. To learn more about these changes, please join our complimentary educational webinar: Increased New Penalty Updates and Best Practices for B & P Notices on Wednesday, July 29th at 1:00 pm CT. This webinar is CPE eligible.
