IRS Announces Easing of ACA Penalties

Although the Internal Revenue Service (IRS) imposes substantial penalties for late filing, the agency has recently announced that employers, who missed the June 30, 2016 deadlines, still have a chance to file the required Affordable Care Act (ACA) returns without any penalties.

IRS Relaxes Penalties

During this first year of reporting requirements, the IRS is showing its flexibility to employers who chose to electronically submit IRS Form 1094-C, yet missed the June 30 deadline. The IRS is not penalizing employees who made “legitimate efforts” to file on time, as long as they file the ACA reports as soon as they can by registering with the ACA Information Returns (AIR) system. Even though the June 30 electronic filing deadline has passed, the AIR system still accepts form submissions.

The IRS announcement doesn’t define what “legitimate efforts” are and so are open to interpretation. The best way for employers to avoid any problems such as late filing penalties is to document their efforts to be compliant such as detailing issues that resulted in late filing.

Other Filing Issues

Late filing is not the only situation in which the IRS is flexible. If employers submit the IRS forms electronically, but the AIR system rejects a submission for any reason, the employer has 60 days to re-file replacement forms. If an employer submitted the forms, but received a message that the forms were accepted, but had errors, the employer can resubmit the corrected forms as many times as needed, even after the June 30 deadline.

The ACA Reporting Requirements

The Internal Revenue Code Section 6056 requires reports that large employers offered their full-time employees health insurance. A large employer is defined as any company with at least 50 full-time employees. If a company doesn’t provide health coverage, it faces huge penalties.

Every large employer has to submit a variety of IRS forms to detail the health insurance provided to full-time employees in the prior year. By filing Form 1094-C about the total health care coverage offered and Form 1095-C for each individual employee, a company proves that it is in compliance with the ACA mandates. Other required documents are Forms 1094-B and 1095-B.

Will This Leniency Continue?

The IRS leniency policy could extend beyond the initial reporting year. The IRS may decide during the transition period to give employers more leeway as they become accustomed to the new reporting requirements. On the other hand, the IRS may decide that one year is enough and enforce penalties for next year’s filing.

Whether the IRS will be lenient next year with late filers of ACA reports remains to be seen.

For your ACA reporting needs visit