Late last year, the IRS began issuing “226J” letters to employers with proposed ACA penalty assessments for 2015. Employers that received these letters often saw eye-popping penalty amounts. Most assessments were at least $100,000, with reports of assessments well into seven figures.
But the news has not been all bad. Employers who have engaged with the IRS have generally found the IRS willing to work with them to provide additional time to evaluate the assessments and prepare a response. Some employers have succeeded in securing significant reductions in the assessed penalties.
A consistent theme among employers who received penalty assessment letters has been a problem with their reporting on Forms 1094-C and 1095-C. Many of the proposed penalty assessments can be traced directly to errors in the forms that were filed for 2015.
For example, employers who failed to answer the question on Form 1094-C about whether they offered coverage to enough of their full-time employees were presumed not to be offering coverage. Problems with the month-by-month codes used on Form 1095-C, such as for months during which an individual was not employed, also have been a source of issues.
All of these notifications point to at least one clear conclusion: Getting the ACA reporting correct makes a difference. Reporting is not just an academic exercise. The IRS is looking at the ACA forms (or, at least, their computers are) and using the information on those forms to determine which employers may be subject to penalties.
That means now is a good opportunity to review your ACA reporting forms for 2016 and 2017, and make sure they accurately reflect the health coverage you offered your employees. If there are gaps or mistakes in the reporting, it may not be too late to fix them before the IRS sends a penalty notice. Identifying any problem areas now will also help you avoid repeating those issues in future filings and address any underlying issues with the way in which coverage is being offered.