Just a reminder (as if any large employer is unaware) that June 30th is the deadline to electronically file forms 1094-C/1095-Cs with the IRS.
Here are answers to recent questions we have been asked:
- There is no extension to file late — the original deadline was several months ago and was extended to June 30th.
- There is no penalty if you file timely but forms are incorrect, so it might be advisable to file by June 30th and then file corrected forms as soon as possible.
- If you don’t make a good faith effort to file by June 30th, the penalty for late filing is $250 per form, to a maximum of $3,000,000 for large employers, and $1,000,000 for smaller employers (defined as those with gross receipts of not more than $5,000,000).
- If you miss the June 30th deadline but file by July 30, 2016, the penalty will be only $50 per return, to a maximum of $500,000 for large employers and $175,000 for small entities.
- If you miss the June 30th deadline but file by November 1, 2016, the reduced penalty will be $100 per return, to a maximum of $1.5 million, or $500,000 for small entities.
If you have already filed or will by June 30th, you can just skip the rest of this article!
For additional information on penalties, see the Leavitt article of March 31 on late filing penalties: https://news.leavitt.com/health-care-reform/late-or-inaccurate-1095-cs-or-bs-consider-the-penalties/
Paper Filings Were Due by May 31st
For smaller employers who were required to file hard copy , (because they had fewer than 250 returns),
Paper filings were due by May 31st, with reduced late filing penalties the same as above: 1) only $50 per return for paper filings made by June 30th, to a maximum of $500,000 for large employers or $175,000 for small entities. 2) $100 per return for late paper filings by November 1, 2016, to a maximum of $1.5 million for large employers and $500,000 for small entities.
Small employers (filing fewer than 250 1095-Cs or 1094-Cs) can elect to file either paper or electronic returns, so a small employer who missed the May 31st paper filing deadline might wish to file electronically by June 30th (and avoid all late penalties) or by July 31st and pay only $50 penalty per return. The practical impediment, however, is that it might be more costly to pay a third party reporting entity to do the filing than to just pay the late filing fee and file paper returns by June 30th.
Late-Filing Penalties and “Reasonable Cause”
As noted initially, the IRS will not impose an “inaccuracy” penalty for 2015 filings , but it will impose a penalty for late or non-filing (with the IRS) or furnishing (forms to employees). However, an employer MAY get relief if it can show that the failure to timely file or furnish was due to reasonable cause and not willful neglect.
What Constitutes “Reasonable Cause” for Late Filing?
Code section 6724 provides that no penalty shall be imposed if the filer shows “that such failure is due to reasonable cause and not to willful neglect.”
In evaluating whether a particular ALE meets the “reasonable cause” test, the IRS will consider whether there were “significant mitigating factors” and whether the failure to timely file “arose from events beyond the filer’s control.” Additionally, the filer must establish that it “acted in a responsible manner.” Some practical applications of these terms:
- One “mitigating factor” the regulations note is whether the filer was required in the past to file or furnish the particular type of return or statement. Since this is the first year that 1095s and 1094s are required, this would be a “mitigating factor” for all employers.
- One type of “event beyond the filer’s control” noted in the regulations is if the filer can show that it contracted with an agent (third party) to file and furnish timely correct statements and provided the proper information sufficiently in advance of the due date.
- In determining whether an employer “acted in a responsible manner,” the IRS will likely take into account whether the employer made reasonable efforts to develop the appropriate procedures, collect the data needed, prepare the forms itself or contract with outside entities to prepare the forms, and furnish the forms to employees and covered individuals or test its ability to transmit information to the IRS directly. The IRS also will take into account the extent to which the employer is taking steps to ensure that it is able to comply with the reporting requirements for 2016.
(For more detail on “reasonable cause,” see IRS regulations at 301.6724-1; for specific application to 1095-1094 filings, see Q/A 3 on the IRS webpage entitled “Questions and Answers on Reporting of Offers of Health Insurance Coverage by Employers” – here.
An example of behavior that is NOT reasonable cause or acting in a responsible manner: You thought this would all just go away by now so you did not deal with it, because you have too much “real work” to do anyway.
Corrected 1095-C Forms
If you sent inaccurate 1095-Cs to employees by March 31, 2016, and then you sent corrected forms to them and had NOT filed with the IRS, you should have written CORRECTED on the revised form to the recipient, but not checked the checkbox on Form 1095-C that indicates a corrected form. Now by June 30th you just file the corrected version of the form with the IRS, but the electronic version will NOT say CORRECTED on it, nor will the “corrected form” checkbox be checked. (It will just appear to the IRS to be an originally correct form.)