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IRS provides guidance on Affordable Care Act information returns

May 20, 2016

Transcript for the IRS Video “Affordable Care Act Information Returns Corrections Process.”

2015 Instructions for Forms 1094-B and 1095-B.

2015 Instructions for Forms 1094-C and 1095-C.

IRS has posted a 42-minute webinar on the IRS Video Portal that discusses deadlines for, making corrections to, and penalties with respect to, the following Affordable Care Act (ACA) information return corrections: Forms 1094-B, Transmittal of Health Coverage Information Returns; Form 1095-B, Health Coverage; Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns; and Form 1095-C, Employer-Provided Health Insurance Offer and Coverage.

Background—ACA reporting requirements. Code Sec. 6055(a) generally requires every health insurance issuer, sponsor of a self-insured health plan, government agency that administers government-sponsored health insurance programs, and other entity that provides “minimum essential coverage” (defined in Code Sec. 5000A(f)) to file annual returns reporting information for each individual for whom such coverage is provided.

Code Sec. 6056 requires annual information reporting by applicable large employers (ALEs) relating to the health insurance that the employer offers (or does not offer) to its full-time employees. In general, an ALE, as defined in Code Sec. 4980H, is an employer that employed an average of at least 50 “full-time employees” during the preceding calendar year. Code Sec. 6056 also requires those employers to furnish related statements to their employees.

Background—the forms themselves. Form 1095-B is used to report certain information to IRS and to taxpayers about individuals who are covered by minimum essential coverage and therefore aren’t liable for the individual shared responsibility payment. 1095-B filers use Form 1094-B (transmittal) to submit Forms 1095-B. (2015 Instructions for Forms 1094-B and 1095-B)

Employers with 50 or more full-time employees (including full-time equivalent employees) in the previous year use Forms 1094-C and 1095-C to report the information required under Code Sec. 6055 and Code Sec. 6056 about offers of health coverage and enrollment in health coverage for their employees. Form 1094-C must be used to report to IRS summary information for each employer and to transmit Forms 1095-C to IRS. Form 1095-C is used to report information about each employee.

In addition, Forms 1094-C and 1095-C are used in determining whether an employer owes a payment under the employer shared responsibility provisions under Code Sec. 4980H.

An employer may choose to file multiple Forms 1094-C, accompanied by Forms 1095-C for some of its employees. One Authoritative Transmittal must be filed for each employer, even if multiple Forms 1094-C are filed by and on behalf of that single employer. The Authoritative Transmittal reports aggregate employer-level data for all full-time employees of the employer.

Form 1095-C is also used in determining the eligibility of employees for the Code Sec. 36B premium tax credit. Employers that offer employer-sponsored self-insured coverage also use Form 1095-C to report information to IRS and to employees about individuals who have minimum essential coverage under the employer plan and therefore are not liable for the individual shared responsibility payment for the months that they are covered under the plan. (2015 Instructions for Forms 1094-C and 1095-C)

Under the “qualifying offer method” and the “qualifying offer method transition relief for 2015,” employers who offer a plan that meets the minimum essential coverage requirement at a very low premium rate may report less information on Forms 1095-B and 1095-C. (Reg. § 301.6056-1(j))

Background—avoiding penalties with respect to the forms. Notice 2016-4, 2016-3 IRB 279, points out that the preambles to the Code Sec. 6055 and Code Sec. 6056 regs (T.D. 9660, 03/05/2014; T.D. 9661, 03/05/2014) provide that, for 2015 returns, IRS will not impose penalties under Code Sec. 6721 (information return penalties) and Code Sec. 6722 (payee statement penalties) on reporting entities that can show that they have made good faith efforts to comply with the information reporting requirements. This relief applies only to furnishing and filing incorrect or incomplete information, including taxpayer information numbers or dates of birth, reported on a return or statement and not to a failure to timely furnish or file a statement or return. The preambles also note, however, the general rule that, under Code Sec. 6724 and the related regs, the Code Sec. 6721 and Code Sec. 6722 penalties may be waived if a failure to timely furnish or file a statement or return is due to reasonable cause, that is, the reporting entity demonstrates that it acted in a responsible manner and the failure is due to significant mitigating factors or events beyond the reporting entity’s control.

Filing deadlines. The webinar notes that the deadline for furnishing 2015 Forms 1095-B or 1095-C to recipients has passed. It was Mar. 31, 2016. Filers who were unable to meet the Mar. 31 deadline should furnish the returns as soon as possible.

The deadline for filing paper copies of the above forms with IRS is May 31, 2016. The deadline for filing the forms with IRS electronically using the AIR (ACA Information Return) electronic filing system is June 30, 2016. Returns must be filed using the XML format.

Penalties. Employers or other coverage providers (taxpayers) may be subject to penalties if the returns are not accurately or timely filed. IRS is providing penalty relief if taxpayers can show they made a good-faith effort to comply with the requirements. IRS notes that correcting errors is part of the good-faith effort to file accurate and complete information returns.

IRS said that, if a filer transmitted a batch of returns with no health coverage information, but only names and addresses, the taxpayer would not meet the good-faith standard for penalty relief, but might qualify for relief under the reasonable cause standard under Notice 2016-4.

Replacing, correcting ACA information returns. If a taxpayer’s electronic transmission of ACA information returns was rejected by IRS, the taxpayer must completely replace the transmission rather than use the correction process. If a taxpayer already furnished Forms 1095-B or 1095-C to recipients, and then determined that the information was incorrect, but has not yet filed those returns with IRS, the taxpayer does not need to file a corrected return with IRS. The first return the taxpayer files with IRS should include the corrected information.

A corrected return is used to correct Form 1095-B, Form 1094-C (Authoritative Transmittal only), or Form 1095-C, that has been filed and accepted by IRS. IRS may have accepted the return even if it included errors. An electronic filer may only correct transmissions that have been either accepted, accepted with errors, or partially accepted by the AIR system. An electronic transmission may be accepted with errors because AIR didn’t find any fatal errors (those that cause a rejected return) while processing the transmission. Partially accepted is defined as “a transmission that was accepted and no fatal errors were identified while processing the schema or data, but at least one submission within the transmission was accepted with or without errors, and at least one submission within the transmission was rejected as unusable data.” A taxpayer is expected to make corrections if IRS accepted a return with errors.

The Form 1094-B Transmittal does not allow for corrections. In addition, a Form 1094-C that is not the Authoritative Transmittal may not be corrected. A corrected return must be marked as a corrected return. In addition, the corrected return must include all the information that was included on the original return, not only the correction.

The webinar includes examples on how to correct Forms 1095-B, 1094-C, and 1095-C. IRS noted that corrected Forms 1095-C should be filed with a Form 1094-C Transmittal, but the transmittal should not be marked as corrected. The employee should receive a copy of his corrected form too. There are special rules for employers that are using the qualifying offer method or the qualifying offer method transition relief for 2015, under which an employer may not be required to furnish its employees with a copy of Form 1095-C.

IRS said that, when correcting information on the Authoritative Transmittal for Form 1094-C, the taxpayer should file a standalone, fully completed Form 1094-C, including the corrected information, and mark it as a corrected return.

There are charts on page 5 of the instructions for Forms 1094-B and 1095-B, and pages 4-5 of the instructions for Forms 1094-C and 1095-C, that list examples of errors that need to be corrected and how to correct them.

The video suggest that taxpayers see IRS Publication 5165 for further information on corrections and replacements of returns.

References: For return requirements for providers of minimum essential coverage, see FTC 2d/FIN ¶  S-3321  et seq.; United States Tax Reporter ¶  60,554; TaxDesk ¶  812,314  et seq.; TG ¶  60245. For return requirements for “applicable large employers,” see FTC 2d/FIN ¶  S-3331; United States Tax Reporter ¶  60,564.01; TaxDesk ¶  816,301; TG ¶  60246.