IRS Questions Businesses About Liabilities Under the Affordable Care Act. Are You Next?
The summer heat can’t affect a blizzard of ACA notices and penalty assessments being sent by the IRS as they determine which employers may have failed to comply with the ACA in 2017. These notices include Letter 5699, Letter 226J and Letter 5005A.
IRS Letter 5699
Officially titled, “Request for Employer Reporting Offers of Health Insurance Coverage (Forms 1094-C and 1095-C),” this letter is sent to employers the IRS believes are Applicable Large Employers (ALEs). These employers have 50 or more full-time employees and full-time equivalent employees that should be filing ACA information annually. Letter 5699 asks employers to confirm the name the ALE used when filing its ACA information, provide the Employer Identification Number (EIN) submitted, and the date the filing was made. Potential issuance of ACA penalties to employers is possible.
While businesses have been the primary focus of these ACA notices, churches and other religious organizations also receive questions from the IRS about potential liabilities under the Affordable Care Act. According to the Tax Blog, “The IRS has begun targeting churches and other religious organizations as part of a compliance program that will run through August 2019, according to Margaret Von Linen, Director of Exempt Organizations. She made these statements at the TEGE Exempt Organizations Council meeting on June 28, 2019.”
It appears the IRS is determining if penalty assessments are warranted for certain employers by cross referencing the number of W-2s employers filed with the IRS with their 1094-C and 1095-C forms. If this information is not consistent, it will lead to the IRS issuing the ALE a penalty notice. Replying to Letter 5699 is crucial if you have already filed information with the IRS because the information you provided should have prevented your organization from receiving an ACA penalty notice.
If you are an ALE that has not filed for the 2017 tax year, Letter 5699 provides the opportunity to provide Form 1094-C and Form 1095-C in response to the IRS if you are not required to file electronically. Currently, employers that are required to file at least Form 1095-C must file electronically. ALEs that have not filed can commit to filing Form 1094-C and Form 1095-C by a specific date, preferably within 90 days of receiving Letter 5699.
The IRS allows employers to make a case as to why they should not be considered ALEs for the reporting year at issue, or to provide some other explanation as to why they have not filed. If the IRS determines that an employer is an ALE and has failed to comply with ACA regulations, they may be subject to two types of penalty notices.
IRS Letter 226J
This is the penalty notice issued by the IRS to those employers the tax agency believes has failed to comply with the ACA’s Employer Mandate. The mandate requires all ALEs to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets Minimum Value (MV) and is Affordable for the employee or be subject to IRS 4980H penalties.
IRS Letter 5005A
This letter is issued to ALEs that failed to furnish 1095-C forms to employees under IRC 6721/6722 or file forms 1094-C and 1095-C with the IRS for the 2017 tax year. These notices focus on the failure of ALEs to distribute 1095-C forms to employees and to file 1094-C and 1095-C forms with the federal tax agency by required deadlines.
Employers with 50 or more full-time or full-time equivalent employees that have not filed their 2015, 2016, 2017 or 2018 tax year ACA information with the IRS should file as soon as possible using IRS Schedules 1094-C and 1095-C to minimize potential IRS penalties. The IRS has made it clear that there will be no waivers provided for ALEs that have not filed their ACA information.
Employers unsure if they are ALEs for these tax years, may consider undertaking an ACA Penalty Risk Assessment. This assessment will tell employers if they are ALE and what their risk exposure to receiving ACA penalties from the IRS. Many third-party experts will provide this assessment at no cost.
If you haven’t begun tracking the ACA-related data for the 2019 tax year for filing with the IRS, it’s time to start.
Here’s what you should do
Contact me to conduct an ACA Penalty Risk Assessment. This assessment reviews your 1094-C and 1095-C forms for previous filing years to ensure that no data errors have been made in your organization’s filings that might put your organization at risk of ACA penalties.
To learn more about ACA compliance for the 2019 tax year, call me or send an email.
Content provided by ACA Times