On November 22, 2021, the Internal Revenue Service (“IRS”) released proposed regulations that provide some relief with respect to ACA reporting requirements. The proposed rule:
Therefore, with respect to Forms 1095-C for calendar 2021, applicable large employers (“ALEs”) have until March 2, 2022 (rather than January 31, 2022) to furnish these forms to full-time employees and other individuals.
It is important to note that the proposed rule does not extend the deadline to file completed Forms 1094-C and 1095-C (and Forms 1094-B and 1095-B) with the IRS. The due date remains March 31, 2022 (or February 28, 2022 for paper filing if filing fewer than 250 forms).
Please note, while the 2021 Forms 1094-C and 1095-C have been finalized, the instructions are not yet available. Once published, the instructions should be available on this website: https://www.irs.gov/forms-pubs/about-form-1095-c.
Below you will find additional details.
Under the ACA, January 31 is the deadline to furnish IRS Forms 1095-C and 1095-B to certain individuals (such as full-time employees, in the case of IRS Form 1095-C) with respect to the preceding calendar year. The proposed regulations grant an automatic extension of 30 days in which to furnish these statements to individuals. The extension is automatic; employers or other reporting entities are not required to file a request with IRS, or to demonstrate reasonable cause to justify the extension.
Employers may rely on this relief for calendar year 2021 filings. This means Wednesday March 2, 2022 is the deadline to furnish individuals with a 2021 Form 1095-C or 1095-B.
While the IRS has provided the automatic extension of time to furnish the Form 1095-C (or Form 1095-B), if operating in a state with an individual mandate the timing to furnish proof of coverage to covered residents may be different.
Since 2015, the IRS provided reporting entities with relief from penalties if those entities could show they made good faith efforts to comply with the information reporting requirements. This relief has been extended each year, with the IRS announcing that 2020 would be the last year that transitional good faith relief would be available.
The proposed rule confirms that the good faith relief from penalties for reporting incorrect or incomplete information on Forms 1094-C, 1095-C, 1094-B and 1095-B is no longer available after 2020. For 2021, penalties for incorrect or incomplete forms furnished to individuals can be $280/return. Additionally, incomplete or incorrect forms filed with the IRS may trigger a $280/return penalty.
While the reasonable cause exception remains available and may provide relief from penalties for entities that can show a reasonable cause for failing to timely or accurately complete their reporting requirements, with the elimination of the good faith relief employers will want to take steps to ensure the accuracy of their forms and filings.
Under the ACA, IRS Forms 1095-C and 1095-B must be sent by first class mail to the last known permanent address of the individual. If no permanent address is known, the statement must be sent by first class mail to the individual’s temporary address. The statement may also be furnished electronically if certain requirements are met.
The proposed regulations would make permanent an alternative method for furnishing IRS Forms 1095-B (and, in some limited cases, IRS Forms 1095-C) to individuals, for as long as penalties under the ACA’s individual shared responsibility rules remain zero. The alternative method would be available to the following reporting entities:
The alternative method is not available to ALEs that are furnishing IRS Form 1095-C to employees considered “full-time” under the ACA for one or more months of the calendar year. Further, the alternative method may not be available if operating in a state with an individual mandate where Forms 1095-C or 1095-B must be furnished to covered residents. Keep in mind, if the alternative method is used, the reporting entity must still file the Form 1095-B with the IRS.
The following steps must be followed by a reporting entity that elects to use the alternative method:
If the proposed regulations are finalized without change, the alternative method would be available to reporting entities that are furnishing IRS Forms 1095-B (and, in some cases, IRS Forms 1095-C) for calendar year 2021, as well as for future calendar years.
Employers should continue to monitor the status of the proposed rule.
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