T.I.E. BlogT.I.E. Blog

(The.Idea.Exchange) Blog. Timely articles on a wide range of topics including new tax legislation, accounting regulations, best practices, industry news, business insights and more.

Warady & Davis Blog – The Idea Exchange (TIE)

Obamacare IRS Employer Reporting: File or Risk Penalties

Employers with 50 or more full-time employees (including full-time equivalent employees) that are required to offer health insurance coverage and report enrollment information for their employees under the Affordable Care Act (ACA), file Internal Revenue Service (IRS) Forms 1094 and 1095.

  • Form 1095-C provides information about health insurance; the employer sends the completed form to both employees and the IRS.
  • The 1094-C acts as a cover sheet for Form 1095; the employer or its vendor sends the completed form only to the IRS.

The deadline for filing these forms is March 31st.

Do you have a 1095/1094 solution?

At a recent ACA employer reporting webinar, participants were asked what percentage of employers with 50 to 300 employees have a 1095/1094 reporting solution. Of the 586 respondents, 32% responded “less than 60%” and only 11% responded “100%.”  Assuming there are approximately 450,000 businesses with 50 to 300 employees, that means at least 150,000 employers lack a 1095/1094 solution.

Let’s say half of these employers “wake-up” and find a solution. That still leaves the other half at risk. Suppose the average employer has 100 employees and the non-filing penalty is $260 per employee. That translates to an average penalty of $26,000. This amount is actually doubled, as the penalty applies to 1) the actual 1095-C form and 2) the IRS filing vis-à-vis the 1094-C. Hence, the average penalty is actually $52,000, which is not tax deductible. And the penalties would be materially higher for non-filing entities that fail to offer health insurance to ACA-eligible employees.

75,000 non-filing employers averaging a $52,000 penalty translates to $3.9 billion. But this is actually a conservative estimate, because the Congressional Budget Office anticipates $9 billion in ACA non-compliance penalties in 2017 based on 2016 activity.

Are you at risk?

You may be thinking that there’s nothing to worry about because the IRS hasn’t issued any employer penalties yet and is unlikely to do so. Experts believe the IRS will in fact issue penalties sometime in 2017.

Get your filings under control

Internal controls are a very important part of the 1095/1094 process. Employers should:

  1. Review human capital metrics (e.g., number of recipients compared to employees)
  2. Confirm that all ACA eligible employees received an offer of coverage
  3. Confirm that line 14 Offer-of-Coverage codes are accurate
  4. Confirm that line 16 Safe Harbor codes are accurate

Here’s the bottom line. No one knows with any certainty what’s going to happen. We do know that the ACA IRS Employer Reporting requirements are still in force. The IRS filing deadline (March 31) is right around the corner. If you’re unsure about your 1095/1094 reporting obligations, please contact Warady & Davis LLP at (847) 267-9600.


Legal Notice: The materials communicated in this transmission are for informational purposes only and not for the purpose of providing accounting, legal or investment advice. You should contact your accountant or advisor to obtain advice with respect to any particular issue or problem. Use of and access to this Web site or any of the e-mail links contained within the site do not create an accountant-client relationship between Warady & Davis and the user or browser. You should not act upon any such information without first seeking qualified professional counsel on your specific matter. Any accounting, business or tax advice contained in this communication is not a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. If desired, Warady & Davis would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired consultation services. ©2017