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On February 21, 2023, the IRS released Final Rules amending the existing requirements related to mandatory e-filing of information returns, including Forms 1094-C and 1095-C, among others. The final rules are effective for all applicable returns due on or after January 1, 2024. While the final rule requires electronic filing for a number of different information returns, such as Forms W-2 and 1099, which were previously allowed to be paper filed by employers of a certain size, this alert addresses the changes applicable to Forms 1094 and 1095, which must be filed by applicable large employers (ALEs) as well as non-ALEs that sponsor self-funded health plans.
Under the final rules, employers filing 10 or more returns must file Forms 1094 and 1095 (and their other applicable returns) electronically. The 10-form threshold is determined based on the total number of forms the employer must file with the IRS, including the Forms 1094 and 1095, as well as other information returns, such as Forms W-2 and Forms 1099, income tax returns, excise tax returns, and employment tax returns, including those that are not required to be e-filed, such as forms 940 and 941. Previously, employers that filed less than 250 of the same ACA reporting forms were allowed to choose whether to file their applicable Forms 1094 and 1095 (either the B or C forms, as applicable) by paper or electronically.
The final rules allow employers to seek a waiver in cases of undue hardship. Per the final rules, a key factor in determining whether hardship exists is whether the cost for filing the returns electronically exceeds the cost of filing the return on paper. Entities seeking a waiver must specify the type of filing to which the waiver applies, the period to which it applies, and the entity must follow any applicable procedures, publications, forms, instructions, or other guidance, including postings to the IRS.gov website, when requesting the waiver. Further, the final rules allow the IRS to grant exemptions from the requirements in certain instances.
All ALEs and many non-ALEs (that report due to sponsoring a self-funded health plan) will be impacted by these changes and will be required to file their tax year 2023 Forms 1094 and 1095 electronically unless they seek and are granted a hardship exception by the IRS. Impacted entities should take the time between now and next year to engage a filing vendor that can assist them with their electronic filing obligations.
The IRS has released final 1094 C and 1095 C forms for 2016 and has posted final instructions as well. The changes from the 2015 forms were minor. However, the instructions for completing the 1094 C and 1095 C forms for 2016 have changed significantly. The changes primarily were more extensive explanations on how to complete the forms.
The final forms and instruction can be found at:
As of now, a full cycle of reporting and penalty determinations has not yet been seen. The due dates for providing the forms and submitting them to the IRS were delayed for the 2015 forms. Employers may not see penalty determinations from the IRS for these forms.
The reporting requirements will affect applicable large employers (ALEs) every year. Employers should establish a process for populating the forms and submitting them to the IRS. If you are responsible for completing these forms, we recommend reviewing the final instructions to ensure understanding of the requirements for completing &submitting the forms.
The following summarizes key points from the 2016 final instructions:
The 2016 instructions are much clearer than the filing instructions from 2015.
The following summarizes key points from the final 2016 Form 1094 C:
The 1094 C has changed minimally for 2016.
The following summarizes key points from the final 2016 Form 1095 C:
A conditional coverage offer to a spouse does not include a spousal surcharge. It does include spousal force outs (spouse not offered coverage if coverage is available through spouse’s employer). Another conditional offer would be if you required spouses to enroll in their employers’ plan, before they could be eligible for your plan.
Employers should start addressing how they will handle reporting for 2016. If you are responsible for completing or checking the forms, read through the instructions. The final 2016 instructions explain more practically the reporting requirements. More examples are included as well.
If you are a self-funded plan and choose to use the B forms for specific non-employees, the B forms and instructions can be found at:
Both the 1095 B forms and the 1095 C forms have a VOID box in the upper right hand corner. Employers are instructed to never check the VOID box.
Both the 1095 B and 1095 C forms include instructions for taxpayers to retain the form with their tax records. It appears these forms will not have to be submitted with tax returns in 2017.
The good faith compliance standard will not apply in 2016 unless the IRS decides at a later date to extend it. In addition, the original deadlines will apply.
Employers should be gearing up now to complete the necessary forms for 2016.
You did it! Your 1095 forms are ready and going out to employees. Now what?
You guessed it: Employee confusion. You’re going to get some questions. If you’re the one in charge of providing the answers, remember a great offense is the best defense. You’ll want to answer the most common questions before they’re even asked.
We’ve put together a list of some basic things employees will want to know, along with sample answers. Tailor these Q&As as needed for your organization. and then send them out to employees using every channel you can (mail, e-mail, employee meetings, company website, social media, posters). Tell employees how to get more detailed information if they need it.
1. What is this form I’m receiving?
A 1095 form is a little bit like a W-2 form. Your employer (and/or insurer) sends one copy to the Internal Revenue Service (IRS) and one copy to you. A W-2 form reports your annual earnings. A 1095 form reports your health care coverage throughout the year.
2. Who is sending it to me, when, and how?
Your employer and/or health insurance company should send one to you either by mail or in person. They may send the form to you electronically if you gave them permission to do so. You should receive it by March 31, 2016. (Starting in 2017, you should receive it each year by January 31, just like your W-2.)
3. Why are you sending it to me?
The 1095 forms will show that you and your family members either did or did not have health coverage with our organization during each month of the past year. Because of the Affordable Care Act, every person must obtain health insurance or pay a penalty to the IRS.
4. What am I supposed to do with this form?
Keep it for your tax records. You don’t actually need this form in order to file your taxes, but when you do file, you’ll have to tell the IRS whether or not you had health insurance for each month of 2015. The Form 1095-B or 1095-C shows if you had health insurance through your employer. Since you don’t actually need this form to file your taxes, you don’t have to wait to receive it if you already know what months you did or didn’t have health insurance in 2015. When you do get the form, keep it with your other 2015 tax information in case you should need it in the future to help prove you had health insurance.
5. What if I get more than one 1095 form?
Someone who had health insurance through more than one employer during the year may receive a 1095-B or 1095-C from each employer. Some employees may receive a Form 1095-A and/or 1095-B reporting specific health coverage details. Just keep these—you do not need to send them in with your 2015 taxes.
6. What if I did not get a Form 1095-B or a 1095-C?
If you believe you should have received one but did not, contact the Benefits Department by phone or e-mail at this number or address.
7. I have more questions—who do I contact?
Please contact _____ at ____. You can also go to our (company) website and find more detailed questions and answers. An IRS website called Questions and Answers about Health Care Information Forms for Individuals (Forms 1095-A, 1095-B, and 1095-C) covers most of what you need to know.