Employer Mandate, Health Care Reform, Large Employers, Reporting Requirements

Holiday Gift of Delayed Due Date for Furnishing 1095-Cs to Employees

The IRS issued notice 2018-06, extending by 30 days the due date by which large employers and health plans must provide 1095-Cs and 1095-Bs to individuals (for the 2017 reporting year).  The due date is now March 2, 2018, rather than January 31, 2018.  Taxpayers do not need to wait to receive these forms before filing their tax returns.  Instead, they can rely on other information provided by their employers to show they had minimum essential coverage in 2017.

The IRS did not, however, extend the deadline by which large employers and health plans must file the 1094 series forms with the IRS.  Those dates remain February 28, 2018 for paper filings and April 2, 2018 for electronic filings. An employer who files 250 or more 1095-C forms must file electronically. Filing entities can still file form 8809 to request an automatic 30-day extension of the due date for filing forms 1094 and 1095.

Important note for employers doing paper filings: Because copies of the 1095-C forms must be filed with the IRS along with the 1094-C, the 1095-C forms must be completed by February 28, 2018 (not by March 2nd), so copies of the 1095-C forms can be attached to the 1094-C form. The 1095-Cs do not actually have to be furnished to participants until March 2nd.

Additionally, Notice 2018-06 extends good-faith transition relief from reporting penalties for incorrect or incomplete information. This applies both to 1095 forms furnished to individuals and to 1094/95 forms filed with the IRS. (This penalty relief also applied to 2016 and 2015 filings.)  Note that this does NOT provide relief from penalties for failure to timely furnish or file these forms, but only from penalties for providing incorrect or incomplete information.

The Notice concludes by stating that the IRS “does not anticipate extending this transition relief” to reporting for 2018.

NEW DUE DATES

March 2, 2018 Furnish 1095-Cs or 1095-Bs to individuals
February 28, 2018 File paper 1094s & 1095s with IRS
April 2, 2018 File electronic 1094s & 1095s with IRS

“Good-Faith” Effort for Inaccurate Filing vs “Reasonable Cause” for Late Filing

Note an important distinction between three different types of penalties the IRS might impose regarding Employer Shared Responsibility and information reporting:

  • Code § 4980H(a) or (b) penalties for not “offering coverage” to at least 95% of full-time employees (75% in 2015) or for offering coverage that was not “affordable” or did not provide “minimum value.”
  • Code § 6721 penalties for inaccurate, incomplete or late filing of forms with the IRS.
  • Code § 6722 penalties for inaccurate, incomplete or late furnishing of forms to individuals.

The 226J letters the IRS sent to some ALEs in November impose §4980H penalties. In contrast, Notice 2018-06 extends good-faith transition relief from some of the §6721 and §6722 reporting penalties for incorrect or incomplete information.

Specifically, Notice 2018-06 provides that the IRS will not impose penalties on ALEs or plans that can show they made a “good-faith effort” to furnish or file accurate and complete information returns. In determining good faith, the IRS will consider whether the employer or other filing entity “made reasonable efforts to prepare for reporting the required information” such as gathering and transmitting the necessary data to an agent to prepare it for submission to the IRS or testing its ability to transmit to the IRS. Additionally, the IRS will take into account the extent to which the employer is “taking steps to ensure that it will be able to comply with the reporting requirements for 2018.”

A separate (“reasonable cause”) standard applies to failure to timely furnish or file forms.  Notice 2018-06 does not offer relief from late filing penalties; however, it points out that under Code §6724 the IRS may waive penalties for late filing or furnishing of forms if the employer can show that late filing was due to “reasonable cause,” which requires that the filing entity show that it “acted in a responsible manner” and the late filing was due to “significant mitigating factors or events beyond the entity’s control.”  In the notice the IRS recommends that entities that do not meet the relevant due dates should still furnish and file, because the IRS will take this into consideration in deciding whether to abate late penalties for reasonable cause.

Cites & References

Notice 2018-06 is 10 pages long (double spaced) and is at https://www.irs.gov/pub/irs-drop/n-18-06.pdf  For additional information, contact Danielle Pierce at the IRS at 202-317-6845  (not a toll-free-number).

Code § 6055 – Information reporting requirement for health insurers and plans (including small employer self-insured plans)

Code § 6056 – Information reporting requirement for applicable large employers (ALEs)

Code § 6721– Penalties for inaccurate, incomplete or late filing of forms with the IRS.

Code § 6722 – Penalties for inaccurate, incomplete or late furnishing of forms to individuals.

Form 8809 – Application for an automatic 30-day extension of time to file forms with the IRS.

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