The IRS recently finalized 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.
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 delayed the deadline until around March 2 (in non-leap years; March 1 in leap years). 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 used to require an IRS filing.
30-day Extension Made Permanent
In November 2021, the IRS proposed a permanent, automatic 30-day extension, without the need for filing with the IRS. The recently finalized rules made that proposal final. This means that although the filing deadline technically remains January 31, employers and coverage providers that deliver the forms to employees/covered persons within 30 days after January 31 still satisfy compliance requirements.
What Has not Changed
This still 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). These new finalized rules do not change that. Employers and coverage providers filing more than 250 forms must file electronically.
Additionally, the preamble to these final rules reiterated that good faith relief will not be available anymore. This echoes what was included in the proposed rules. “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 did not apply to forms filed for the 2021 year and will not apply to any future forms. 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.
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.
Contributors: Zywave. Republished with Permission. Some content by Leavitt Group.