By: HUB’s EB Compliance Team

The IRS recently released proposed rules that would make permanent and automatic the 30-day extension for furnishing ACA reporting forms to individuals. This is a welcome development for Applicable Large Employers and providers of health coverage. In further good news, the IRS has stated that the proposed relief is available for 2021 reporting. This means ALEs that are anxious about the looming January 31, 2022, deadline can breathe a sigh of relief.

Form Requirements

As we have detailed before, the Affordable Care Act (“ACA”) requires Applicable Large Employers or ALEs (generally over 50 full-time equivalent employees) and small self-funded/level-funded groups (under 50 full-time equivalent employees), among others, to file and distribute certain tax forms. ALEs generally file Forms 1094-C and 1095-C while providers of health coverage (including small self-funded/level-funded groups) file Forms 1094-B and 1095-B.

These forms enable IRS enforcement of ACA’s health coverage mandate provisions.  Specifically, the forms are intended to tell the IRS if the employer (or coverage provider) complied with certain ACA requirements. The forms also help the IRS determine if individuals are eligible for tax credits to buy individual coverage.

Providing a Challenge

In addition to filing with the IRS, ALEs and coverage providers are also required to provide a copy of the applicable 1095 form to employees or covered individuals. Under the law, the deadline for providing those forms is January 31.

Since its inception, a key ACA reporting form challenge has been providing them by the January 31 deadline. Recognizing this, the IRS has released guidance year-after-year-after-year granting an automatic 30-day extension. This delays the deadline until around March 2 (depending on whether it is a leap year and whether the deadline falls on a weekend). However, employers and coverage providers could never count on this relief, and it would sometimes arrive extremely late in December.

While there has always been an option to automatically secure a 30-day extension, it required an IRS filing. 

A Proposal You Can Rely On

The recently proposed rules would make the 30-day extension permanent and automatic, without the need for filing with the IRS.  If finalized, this means that although the filing deadline technically remains January 31, employers and coverage providers would be able to take advantage of a 30-day extension automatically. As a result, employers and coverage providers that deliver the forms to employees/covered persons within 30 days after January 31 still satisfy compliance requirements.

Notably, these proposed rules say employers and coverage providers may rely on them for the 2021 reporting forms. This is not typical; usually proposed rules are just that – proposed – but in rare circumstances, the IRS and Treasury Department do allow taxpayers to rely on the rules before they are final. Fortunately, this is one such instance. This means employers get the advantage of the 30-day extension this coming January if they choose to take it.

What Has not Changed

This has not changed the deadline for filing with the IRS.  These forms must be filed with the IRS by February 28 (if filing on paper) or March 31 (if filing electronically). Employers and coverage providers filing more than 250 forms must file electronically.

Additionally, the preamble to these proposed rules reiterated that good faith relief will not be available anymore. "Good faith” was relief for some inadvertent Form 1094/1095 reporting errors that the IRS provided annually through 2020. It covered incorrect or incomplete information, including taxpayer identification numbers or dates of birth, reported on information returns or statements. In other words, if an employer or coverage provider had some incorrect information on a form, it would not be penalized if it filled the form out in good faith. 

However, that will not apply to forms filed for the 2021 year. This increases the stakes for making sure that accurate information is included on the forms. Therefore, employers should take a closer look at the forms generated by their vendors to make sure the information is accurate.

Takeaways

Employers have something to be thankful for: an automatic and permanent 30-day extension to furnishing ACA reporting forms to their employees.  However, this does not change the filing deadline with the IRS. Moreover, employers should pay careful attention to the forms given the elimination of good faith relief.

If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory.

NOTICE OF DISCLAIMER

Neither Hub International Limited nor any of its affiliated companies is a law or accounting firm, and therefore they cannot provide legal or tax advice. The information herein is provided for general information only, and is not intended to constitute legal or tax advice as to an organization’s or individual's specific circumstances. It is based on Hub International's understanding of the law as it exists on the date of this publication. Subsequent developments may result in this information becoming outdated or incorrect and Hub International does not have an obligation to update this information. You should consult an attorney, accountant, or other legal or tax professional regarding the application of the general information provided here to your organization’s specific situation in light of your or your organization’s particular needs.