The IRS recently released the inflation adjustments for Affordable Care Act (“ACA”) reporting penalties (among other items) for 2019. As a reminder, these penalties may be imposed by the IRS for failure to file with the IRS and/or distribute to employees the Forms 1094 and 1095. These penalties are separate and different from the ACA employer mandate penalties associated with not offering (or offering non-compliant) health insurance coverage.

The new reporting penalties (with 2018 for comparison) are as follows:

Large Businesses with Gross Receipts of More Than $5 Million and Government Entities (*Based on average annual gross receipts for the most recent 3 taxable years)
Time forms are filed/furnished For Forms Due in 2018 For Forms Due in 2019
Not more than 30 days late (by March 30 if the due date is February 28) $50 per return/ $536,000 maximum $50 per return/ $556,500 maximum
At least 31 days late, but before August 1 $100 per return/ $1,609,000 maximum $110 per return/ $1,669,500 maximum
After August 1 or Not At All $260 per return/ $3,218,500 maximum $270 per return/ $3,339,000 maximum
Intentional Disregard Per return, the greater of either: $530, or 10% of aggregate amount of items required to be reported correctly / No maximum Per return, the greater of either: $550, or 10% of aggregate amount of items required to be reported correctly / No maximum

 

Large Businesses with Gross Receipts of $5 Million or Less (*Based on average annual gross receipts for the most recent 3 taxable years)
Time forms are filed/furnished For Forms Due in 2018 For Forms Due in 2019
Not more than 30 days late (by March 30 if the due date is February 28) $50 per return/ $187,500 maximum $50 per return/ $194,500 maximum
At least 31 days late, but before August 1 $100 per return/ $536,000 maximum $110 per return/ $556,500 maximum
After August 1 or Not At All $260 per return/ $1,072,500 maximum $270 per return/ $1,113,000 maximum
Intentional Disregard Per return, the greater of either: $530, or 10% of aggregate amount of items required to be reported correctly / No maximum Per return, the greater of either: $550, or 10% of aggregate amount of items required to be reported correctly / No maximum

 

With regard to the penalties, recall that these penalties apply separately to the filing of the returns with the IRS and distributing them to employees. Therefore, if an employer fails to both file a Form1095-C with the IRS and distribute it to the employee, the employer would face two penalties for that one form: (1) the penalty for failure to file with the IRS; and (2) the penalty for the failure to distribute to the employees. (Note, however, that the IRS once again extended the deadline for distributing 2018 reporting forms to employees.)

In addition to missing the deadline, penalties can also be triggered by:

  • Submitting a paper-filing when required to file electronically (more on that below);
  • Not reporting a Taxpayer Identification Number (TIN) for a covered person. However, there is a process for requesting TINs when you do not have them that can help you avoid penalties (HUB can help – please reach out to your account manager or regional Chief Compliance Officer for sample TIN communications);
  • Filing forms that do not include all required information (although the IRS recently gave breathing room for good faith compliance for 2018 reporting in 2019);
  • Report an incorrect TIN for a covered person or other incorrect information; or
  • Not filing paper forms that are machine readable (if you’re not required to file electronically).

The filing penalties make it important to file using the correct reporting forms and ensure that the information is up to date.

A Note Filing Electronically

Generally, employers filing 250 or more of a particular IRS form (like a Form 1095-C) are required to file electronically. This 250 threshold currently applies separately to each form. For example, an employer that files 150 Forms W-2 and 125 Forms 1095-C would not have to file electronically, even though the total number of all forms (275) is more than 250.

However, in May of this year, the IRS proposed regulations that would change how the threshold is calculated. Specifically, electronic filing would be required if an employer had to file more than 250 information returns of any type. This includes Forms 1095-C as well as W-2, 1099 series, and several other forms. Under this proposed rule, an employer that files 150 Forms W-2 and 125 Forms 1095-C would be required to file those forms electronically.

The regulations included a proposed effective date of January 1, 2019. If that were to hold, that would mean this new rule would apply to reporting for 2018 that occurs in early 2019. However, to date, the regulations have not been finalized. While HUB is not aware of any official or unofficial statements from the IRS, HUB does not expect these regulations to become effective January 1, 2019 at this point given how close that date is. That said, employers should work with their tax advisors on whether to file by paper or electronically in 2019.

Your HUB Advisor can assist you by connecting you with Hub’s library of resources and materials and vendors who can assist with reporting. You can also view more compliance articles in our Compliance Directory.

NOTICE OF DISCLAIMER

The information herein is intended to be educational only and is based on information that is generally available. HUB International makes no representation or warranty as to its accuracy and is not obligated to update the information should it change in the future. The information is not intended to be legal or tax advice. Consult your attorney and/or professional advisor as to your organization’s specific circumstances and legal, tax or other requirements.