Are you scratching your head about the status of the Affordable Care Act (ACA) … and whether you’re still responsible for reporting health plan coverage on your tax return? You’re not alone! The ACA was the target of much debate in the new administration’s first term, leaving a lot of questions in its wake. According to a recent ComplyRight survey the uncertainties surrounding the ACA reporting rules are tremendous:
- 39% of respondents were unsure if ACA reporting for 2017 was required
- 22% were unsure about the information needed to meet the reporting requirements
- 61% weren’t concerned at all (or only slightly) with IRS enforcement of the reporting requirements
First, let me set the record straight regarding these important issues – and, then, provide some helpful insight so you’re better prepared in the coming months.
1) The ACA remains the law of the land – and 2017 reporting is mandatory
The ACA was not repealed or replaced this past year. The legislation is still in effect, and employers must continue to comply with the reporting requirements.
Affected employers – mostly applicable large employers (ALEs) with 50 or more full-time or full-time equivalent employees — must file annual information returns with the IRS and furnish employee statements with health plan coverage information. The reporting responsibility is simpler for smaller businesses, which the ACA defines as those with fewer than 50 full-time employees. Among this group, self-insured businesses must report the name, address and Social Security number (or date of birth) of employees and family members who have coverage under the plan. Small businesses that aren’t self-insured don’t need to file anything.
2) The same information as last year is needed to meet the reporting requirements
The two main types of ACA forms are “C” forms and “B” forms. ALEs, whether self-insured or insured, must file Forms 1095-C (and 1094-C transmittal) with the IRS and furnish a copy of the 1095-C to all full-time employees. Employers that are non-ALEs with a self-insured plan will complete Forms 1095-B (and 1094-B transmittal).
The bulk of the work in completing the 1095-C is with Lines 14-16 in Part 2. You’ll most likely need to pull from three areas within your business to gather the necessary information: HR, payroll and benefits. Your time-tracking systems may come into play, too. The key items you’ll need to track:
Total employee count based on hours of service (including full-time and full-time equivalents)
Most likely pulled from payroll or time-tracking system
Employee name, Social Security number and address
Most likely pulled from HR records
Health care coverage offered
Employee share of the lowest-cost monthly premium for self-only coverage
Months the employee was enrolled in coverage
Affordability safe harbor provisions or other relief
If self-insured, information about the covered individuals, including Social Security numbers and months of coverage
Most likely pulled from HR records and benefits
3) Take IRS enforcement seriously because it’s expected to be stricter
New this year, the IRS has announced that it won’t waive the Employer Shared Responsibility Payments (ESRP). Further still, it won’t accept 1040s from individual taxpayers without the proper health care coverage information. As a result, you must file and furnish the proper forms by the deadlines – or deal with upset employees who can’t file their personal returns, as well as potential penalties from the IRS.
Keep in mind, the IRS has stressed its commitment to enforcing the rules, even though it was slow to act in the past. Sophisticated systems are now in place to enforce the rules and target employers who don’t comply.
To stay on schedule and avoid IRS penalties, you’ll want to gather employee data and health care coverage throughout the year, or as soon as possible before the tax-filing deadlines:
- January 31, 2018 – mail employee copies
- February 28, 2018 – paper-filing deadline
- April 2, 2018 – e-filing deadline
Get help from a reputable tax accountant or e-file provider to prepare your taxes. E-filing is becoming increasingly more popular with small businesses. It could be a smart option for mandatory 1099, W-2 and ACA filings – this tax season and beyond.
About the Author
Rick Roddis is President of ComplyRight Distribution Services. In his role, he’s focused on transforming the company from a traditional forms manufacturer to a digital provider of businesses tax solutions.