From our partners at Benecon.
The Department of Treasury and the IRS have issued proposed regulations1 that will impact 2021 and future year ACA employer reporting requirements under Sections 6055 and 6056 (reported on the 1094-B/C and 1095-B/C Forms). This article will summarize the relevant changes. While the regulations are still in a proposed format, the IRS has indicated that employers and insurers may rely upon these regulations for the 2021 reporting (due in 2022).
I: Permanent Extension of Deadline to Furnish Forms 1095-B and 1095-C to Applicable Individuals
For the past five years, the IRS extended the deadline for furnishing the 1095-B and 1095-C Forms to applicable individuals. Last year, the IRS was clear in stating that no further extensions would be made available. In a surprising move, the IRS reversed course with the proposed regulations for the 2021 filing year and for all future filing years.
The due date for furnishing 2021 (and all future year) Forms 1095-B and 1095-C to applicable individuals has been extended from the original due date of January 31. The new permanent deadline will be March 2 of each year (or the next business day if March 2 falls on a weekend/holiday).
NOTE: The due date for filing the Forms 1094-B and 1094-C with the IRS remains unchanged (February 28 or March 31 if filing electronically).
II: Alternative Method of Furnishing Forms 1095-B and 1095-C to Individuals
The proposed regulations provide that an employer would not be required to send Form 1095-B to all employees or 1095-C to part time employees and non-employees enrolled in the employer’s self-insured plan, as long as the employer meets two requirements:
1 https://www.irs.gov/pub/irs-drop/reg-109128-21.pdf
- The reporting entity posts a “clear and conspicuous” notice prominently on its website stating that responsible individuals may receive a copy of their Form 1095-B or 1095-C upon request, accompanied by an email address and a physical address to which a request may be sent, as well as a telephone number that responsible individuals can use to contact the reporting entity with any
- The entity must retain the notice on its website until October 15 of the year following the calendar year to which the Form relates.
Please note that his relief does not eliminate the Form 1095-B / 1095-C requirement. If applicable, groups must still file the Form 1095-B and 1095-C with the IRS in accordance with all filing deadlines. Failure to do so will still result in assessment of penalties.
NOTE: This relief does not apply with respect to full-time employees for 1095-C.
III: Elimination of the Good-Faith Relief for Form 1094-B/C and 1095-B/C
In prior years, in order to give reporting entities more time to come into compliance with the complex ACA reporting rules, the IRS stated it would not impose penalties for the reporting of incorrect or incomplete information if the reporting entity could show it made reasonable good faith efforts to comply with the reporting requirements. This transitional “good faith” relief was extended through the 2020 tax year.
The IRS proposed rule has permanently eliminated the “good faith” transitional relief. The IRS has taken the position that the relief should no longer apply since the reporting requirements have been in place for six years.
The elimination of this transitional relief is significant. With the relief in place, employers did not need to be concerned with minor mistakes or missing information so long as they could show that they made reasonable “good faith” efforts to comply. Now, even minor errors could trigger potential penalties of up to $560 per form ($280 for an incorrect form provided to an employee, and another $280 for providing an incorrect form to the IRS). While it may still be possible to get penalties waived on a showing of “reasonable cause,” this is now a higher standard for an employer to overcome after a penalty would already be assessed.
As such, it is now more important than ever for employers to work diligently on ensuring the accuracy of their ACA reporting forms. This includes, but is certainly not limited to, examining their outside vendor agreements to determine liability in the case of a mistake and timelines to ensure plenty of review time before filing deadlines. Also, employers should create their own review processes and establish documentation standards.
Benecon will continue to monitor this issue and provide updates if additional guidance is released by the IRS. In the meantime, for more information on Benecon, please visit our website at www.Benecon.com
