As we reminded employers back in December, the IRS has extended the Affordable Care Act ("ACA") deadline for health plan sponsors to furnish individuals IRS Forms 1095-B and 1095-C until March 2, 2020.
However, it did not extend the due date for filing the 2019 Forms 1094-B, 1095-B, 1094-C, or 1095-C with the IRS. Those Forms are due February 28, 2020, for paper filers, and March 31, 2020, for electronic filers. Following a few simple rules will make this process much smoother for both employers and employees.
Tips for All Filers
Some common errors that we see on Forms 1094-C and 1095-C that may give rise to initial assessments or questions from the IRS include:
- If you made an offer of minimum essential coverage to at least 95% of your full-time employees and dependents, make sure to check "yes" in the appropriate "Minimum Essential Coverage Indicator" box(es) on Part III of Form 1094-C (whether for all 12 months, or for only particular months).
- If you are part of a controlled group of entities or an affiliated service group (for this purpose referred to as an ("Aggregated ALE Group")), make sure you check "yes" on Part II, Line 21 of Form 1094-C, check the "aggregated group indicator" box on Part III, and provide the names and EINs of other Aggregated ALE Members on Part IV. Additionally, be sure each entity files its own Form 1094-C.
- On Form 1095-C, make sure that the Form for each employee provides a code in each box for Lines 14 and 16. Depending on the code used on Line 14, Line 15 may not need to be completed.
- Mid-year hires and terminations should typically be coded with 1H on Line 14 and 2A on Line 16 on Form 1095-C for the months when the employee was not employed. Typically, for the month of termination, Line 14 should be coded with 1H and Line 16 should be coded with 2B.
Tips for Paper Filers
First, if filing by paper, employers should ensure that they are eligible to do so. Only employers with fewer than 250 returns may submit their filings to the IRS by mail. Companies with 250 or more returns must submit electronically.
Secondly, employers should ensure that they are using the latest official IRS Forms available on IRS.gov. Last year, numerous employers received IRS Letter 1865C, which ominously suggests that it cannot process the ACA Forms (but fails to explain why). After some digging and calls to the IRS, in our experience, we found that this was typically because the Forms were filled out in small font, or the signature pages were flipped from landscape to portrait orientation (apparently, the IRS hates vertical Forms as much as others hate vertical video).
Finally, when packaging the Forms, send them in a flat envelope, unfolded, with no paperclips or staples, via First-Class Mail, preferably certified mail with return-receipt requested. If you need to send multiple packages, mark each package consecutively, and place Form 1094-C in the first package. Make sure they are sent to the appropriate address based on your principal business office. Keep copies of the returns for your records.
Tips for Electronic Filers
Make sure that you keep (or obtain from your vendor) a copy of your E-Filing Submission Status that will indicate whether your return was "Accepted," "Accepted with Errors," or "Rejected," along with a Receipt ID. We have seen a number of circumstances where the IRS has incorrectly alleged that an employer had not timely submitted its Forms in prior years. Keeping this proof of submission makes responding to this allegation fairly simple. Also keep (or request from your vendor) a copy of the actual electronic transmission package for your records, in case there are questions in future years as to how something was reported.
Be sure to take the opportunity to review Forms that are "Accepted with Errors" or "Rejected." In the case of Forms that are "Accepted with Errors," this means that the IRS system did not find any fatal errors to cause a rejection. Typically, this will mean that there is a mismatch between names and Taxpayer Identification Numbers ("TINs") (which is most commonly a Social Security Number). The IRS still expects such returns to be corrected, but it may not be possible to resolve some TIN mismatches. Returns that are "Rejected" must be corrected within 60 days to treat the date of original filing as the submission date.
Tips on Providing Documents to Employees
When employers provide Forms 1095-C to employees no later than March 2, 2020, it may be helpful to provide employees with some context as to what the Forms are and what they mean.
- The Forms show employees whether the employer offered them affordable health care coverage that provided minimum value during the past year.
- The Forms are not necessary for filing individual federal income tax returns, but are important to keep for their tax records, especially in states where there is a requirement to maintain health insurance (New Jersey, Massachusetts, and Washington, D.C. have such requirements for 2019; California, Vermont and Rhode Island will have such requirements for 2020).
- Provide employees with a contact name and phone number if they have any questions.
Employers should remember that the IRS has provided that no penalty will apply to reporting entities which report incomplete information if the entity can demonstrate that it made good faith efforts to comply with the information reporting requirements, but that entities that fail to file information returns or fail to provide statements to covered individuals are not eligible for this relief. Therefore, while employers should absolutely endeavor their best to be as accurate as possible, being timely is of even greater importance, at least for this year.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.