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Earlier this week, the IRS issued Notice 2019-63, which extends both: (1) the filing deadline for Forms 1095-C and 1095-B; and (2) the good-faith reporting relief.  But this year, there’s more.  In limited circumstances, the IRS will not penalize entities for the failure to furnish information to individuals using Form 1095-B, and in some cases, Form 1095-C (see discussion of Section 6055 Relief below).

 Deadline Extension

Notice 2019-63 extends the due date for reporting entities to furnish 2019 Forms 1095-C and 1095-B to individuals from January 31, 2020 to March 2, 2020.  These forms must also be filed with the IRS (along with the applicable transmittal statement) by February 28, 2020 (if filed on paper) or March 31, 2020 (if filed electronically).  Reporting entities may, however, request individual extensions to file these forms with the IRS.

Good-Faith Reporting Relief

The IRS may impose penalties of up to $270 per form for failing to furnish an accurate Form 1095-C or 1095-B to an individual and $270 per form for failing to file an accurate Form 1095-C or 1095-B with the IRS.  As in prior years, the IRS indicated in Notice 2019-63 that it would not impose these penalties for incomplete or inaccurate forms for the 2019 calendar year (due in 2020), if the reporting entity can show that it “made good-faith efforts to comply with the information-reporting requirements.”  This good-faith reporting relief does not apply to forms that were untimely furnished to individuals or filed with the IRS.

Section 6055 Relief

Under Section 6055 of the Internal Revenue Code (the “Code”), providers of minimum essential coverage must furnish certain information to “responsible individuals” about enrollment in the minimum essential coverage during the previous calendar year.  The purpose of this reporting requirement is to assist the IRS enforce compliance with the “individual mandate” penalty under the ACA.

Under the Tax Cuts and Jobs Act of 2017, the individual mandate penalty was not repealed, but the penalty amount was reduced to zero.  This makes reporting under Section 6055 of the Code irrelevant.  As a result, Notice 2019-63 provides limited relief from the reporting requirements under Section 6055 of the Code.

Here is a brief summary of the Section 6055 reporting requirements:

  • Insurers. For employers that sponsor fully insured group health plans, the plan’s insurer must comply with the Section 6055 reporting requirements using Forms 1094-B and 1095-B.
  • Self-Funded Plan Sponsors. For employers that sponsor self-funded plans, the employer must comply with the Section 6055 reporting requirements. But, the applicable forms depend on whether or not the employer is an “applicable large employer” that is subject to the Employer Shared Responsibility Payment (i.e., the “pay or play” penalty):
    • Small Employers. Employers that are not subject to the pay or play penalty use Forms 1094-B and 1095-B.  (Employers that are not subject to the pay or play penalty generally don’t have enough employees to sponsor a self-funded plan.  So, it is rare for employers to file Forms 1094-B and 1095-B.)
    • Large Employers. Employers that are subject to the pay or play penalty generally use Forms 1094-C and 1095-C.  (Forms 1094-C and 1095-C allow the employer to comply with its reporting obligations under both Sections 6055 and 6056 of the Code.  Under Section 6056 of the Code, employers must report compliance with the pay or play penalty.)

Notice 2019-63 provides relief with respect to Forms 1095-B and limited relief with respect to Forms 1095-C.  For insurers and small self-funded employers, the entity must still prepare and file the Forms 1095-B with the IRS.  However, these entities are not required to furnish individuals with a copy of the Form 1095-B as long as the entity satisfies both of the following requirements:

  • The entity prominently posts a notice on its website stating that responsible individuals may receive a copy of their Form 1095-B upon request. The notice must contain both an email and a physical address that responsible individuals can use to request their Form 1095-B, and a telephone number that the responsible individual can use to contact the entity with questions.
  • The entity furnishes the responsible individual with their Form 1095-B within 30 days of the date that the entity receives the request.

Notice 2019-63 generally does not extend this relief to large self-funded employers, except for Forms 1095-C that are prepared on behalf of individuals who are not full-time employees for the entire 2019 calendar year.  A large employer sponsor of a self-funded plan may file a Form 1095-C on behalf of an individual who was enrolled in the self-funded plan during the 2019 calendar year, but was not a full-time employee during any month of the calendar year.  (For these individuals, the “all 12 months” column of line 14 is completed using the code “1G.”)  Examples of where this relief may extend to Forms 1095-C are: (1) former employees who terminated employment before 2019 but were enrolled in the self-funded plan under COBRA or retiree coverage; and (2) employees who were part-time during all of 2019, but were enrolled in the self-funded plan because the plan sponsor extended eligibility for the self-funded plan to part-time employees.

Conclusion

While the filing deadline extension and the extension of the good-faith reporting relief is likely welcome news to insurers and employers alike, it’s probably not surprising.   And, while the Section 6055 reporting relief is likely surprising, it’s probably only meaningful to insurers.

IRS to Accept Tax Returns Lacking Health Coverage Status & Employer Reporting Remains Unchanged

February 22 - Posted at 5:31 PM Tagged: , , , , , , , , , , , ,

On Feb. 15, the IRS announced on its ACA Information Center for Tax Professionals webpage that it would not reject taxpayers’ 2016 income tax returns that are missing health coverage information.


This information is supposed to be included on line 61 of the Form 1040 and line 11 of the Form 1040EZ to demonstrate compliance during the year with the Affordable Care Act’s (ACA’s) mandate that individuals have health insurance that meets ACA standards, or else pay a penalty.


Two crucial points regarding the IRS announcement should be stressed:

  • The announcement only applies to personal income tax filers—it does not affect employers disclosure and reporting obligations.

  • It is not a repeal of the individual mandate- penalty provisions are still in place and are currently being enforced.

The IRS indicated that it will accept tax returns lacking this information in light of President Donald Trump’s executive order directing agencies to minimize the ACA’s regulatory burden. While the requirement to have ACA-compliant coverage or pay a tax penalty has been in place since 2014, starting this year the IRS was to have begun automatically flagging and rejecting tax returns missing that information.


“This action by the IRS doesn’t mean it won’t enforce the individual mandate,” said Lisa Carlson, senior Employee Retirement Income Security Act (ERISA) attorney at Lockton Compliance Services in Chicago. “This action simply means the IRS won’t reject a taxpayer’s return outright if the taxpayer doesn’t answer the health coverage question. The IRS reserves the right to follow up with a taxpayer, at a future date, regarding his or her compliance with the individual mandate, if the person’s tax return doesn’t provide information about his or her health insurance coverage during 2016.”


Enforcement Uncertainty


For those individuals who previously filed without providing health insurance information or who indicated that they did not carry coverage as was required, “whether the IRS will assess penalties depends on the retroactive nature of [a possible future] repeal of the individual mandate or its penalties,” Carlson said.


While the IRS announcement does not suggest that the agency won’t be strictly enforcing the individual mandate tax penalty, “we just don’t know” what enforcement actions the agency might take, said Garrett Fenton, an attorney with Miller & Chevalier in Washington, D.C., whose practice focuses on employee benefits, tax and executive compensation.


While it’s unclear how strenuous IRS enforcement actions might be, “the individual mandate and its related tax penalties are certainly still on the books, and it would require an act of Congress to change that,” Fenton noted. If tax filers leave unchecked the box indicating that they have ACA-compliant coverage, “the IRS may come back and ask them follow-up questions, and they still may get audited and potentially owe the tax penalty.”


Employer Compliance


The ACA is still the law of the land and prudent employers will want to continue to comply with the ACA, including the play-or-pay mandate and reporting requirements, including furnishing Forms 1095-C to employees and making all required filings with the IRS, until formal guidance relieves them of those compliance obligations.


Despite the IRS announcement, employers are still required to file their ACA reporting forms and those forms will be rejected if they do not contain the requisite information. Because the President has indicated that we may not see a repeal until 2018, employers will still be required to operate their health plans in an ACA-compliant manner until notified otherwise.


In the context of the employer mandate, waiver of penalties seems unlikely because these penalties are written into law and are a significant source of revenue for the federal government. 


The bottom line: Those who are responsible for issuing and filing 1094s and 1095s on behalf of their organizations should continue to comply with all relevant laws, regulations, reporting requirements and filing specifications during the repeal-and-replace process.


Deadlines Loom


The IRS issued Notice 2016-70 in November 2016, giving employers subject to the ACA’s 2016 information-reporting requirements up to an additional 30 days to deliver these forms to employees. The notice affected upcoming deadlines for ACA information reporting as follows:


  • The IRS extended the deadline to deliver ACA reporting forms to employees from Jan. 31 to March 2. Employers must deliver to workers the 2016 Form 1095-C (Employer-Provided Health Insurance Offer and Coverage) and Form 1095-B (Health Coverage).


The Treasury Department and the IRS determined that a substantial number of employers and other insurance providers needed additional time “to gather and analyze the information [necessary to] prepare the 2016 Forms 1095-C and 1095-B to be furnished to individuals,” Notice 2016-70 stated. This extension applies for tax year 2016 only and does not require the submission of any request or other documentation to the IRS.



  • The IRS did not change the deadline for filing Forms 1094 and 1095 with the agency.This indicated no automatic extension was likely to file the 2016 Form 1094-B (Transmittal of Health Coverage Information Returns) along with copies of Form 1095-B, and Form 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns) along with copies of Form 1095-C.
    • Employers filing these forms by mail will still need to do so by Feb. 28.
    • Employers filing electronically (as those submitting 250 or more forms are required to do) must do so by March 31. 


Although the date for filing with the IRS was not extended, employers can obtain a 30-day extension by submitting Form 8809 (Application for Extension of Time to File Information Returns) by the due date for the ACA information returns.


Note: For small businesses with fewer than 50 full-time equivalent employees that provide employees with an ACA-compliant group plan, the rules are a bit different. If fully insured, the insurance company that provides coverage is required to send enrollees a copy of Form 1095-B and to submit Forms 1995-B (along with transmittal Form 1094-B) to the IRS in order to report minimum essential coverage.


If a small company is self-insured and provides group coverage, it must also provide employees and the IRS with Form 1095-B. But small business that offer insurance are not required to send Form 1095-Cs to employees or to the IRS.


Small business that do not provide group coverage are not subject to ACA reporting.


While Congress considers options to repeal and replace the ACA, businesses should prepare to comply with the current employer mandate through 2018. Businesses should pay close attention to decisions over the next few weeks, but be prepared to stay patient because significant details on employer obligations are unlikely to take shape for some time.

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