On December 28, 2015 the IRS released IRS Notice 2016-4, extending the due dates for the 2015 ACA information reporting on forms 1094-B, 1095-B, 1094-C and 1095-C and providing guidance for individual taxpayers affected by these extensions. These ACA reporting forms provide information to the IRS and individuals regarding information required under Code Sections 6055 and 6056.
As background, Section 6055 reporting requires that every provider of minimum essential coverage (e.g. coverage under an employer-sponsored plan) report coverage information to the IRS and individuals for purposes of administering the individual mandate under Code Section 5000A. Code Section 6056 reporting requires an “applicable large employer” or “ALE” (i.e. an employer with 50 or more full-time employees, including full-time equivalent employees, in the previous year) to file information returns with the IRS and provide statements to full-time employees about health insurance coverage offered to the employee (if any) for purposes of administering the employer mandate provisions under Code Section 4980H and for determining whether an employee is eligible for the premium tax credit under Code Section 36B.
The 1094-B and 1095-B report 6055 information and the 1094-C and 1095-C report 6056 information. For ALEs that sponsor self-insured plans, the 1095-C permits the combined reporting of 6056 (Part II of the 1095-C) and 6055 information (Part III of the 1095-C) on one single form. If the ALE sponsors fully-insured coverage, the ALE will only complete Parts I and II of the 1095-C, and the insurance carrier will prepare the 1094-B and 1095-B to report 6055 information.
Extended Due Dates for the 1094-B, 1095-B, 1094-C and 1095-C
Notice 2016-4 automatically extends the due dates for
- Furnishing the 2015 1095-B and 1095-C from February 1, 2016 to March 31, 2016
- Filing the 2015 1094-B, 1095-B, 1094-C and 1095-C with the IRS from
- February 29, 2016 to May 31, 2016 (if not filing electronically)
- March 31, 2016 to June 30, 2016 (if filing electronically)
See the instructions for the 1094-B and 1095-B and the 1094-C and 1095-C regarding whether you are eligible to file electronically. Notice 2016-4 provides that, in light of these automatic extensions, the provisions in the filing instructions regarding automatic and permissive extensions of time for filing information returns and permissive extensions of time for furnishing statements instructions will not apply to the 2015 extended due dates above.
Penalties and Relief for 2015 Reporting
Employers or other coverage providers that do not comply with these extended due dates are subject to penalties under Code Section 6722 or 6721 for failure to timely furnish and file. Code Section 6721 and 6722 provide for penalties of $250 per return per day, with an annual cap of $3 million for all failures under such provision during a calendar year. If there is intentional disregard of the requirements, there are special rules that increase the per-statement penalty.
For 2015, the IRS has provided relief from these penalties where the reporting entity can show that it has made good faith efforts to comply with the information reporting requirements. However, this relief applies only to furnishing and filing incorrect or incomplete information and not for failing to timely file or furnish, unless the failure to timely file or furnish the information statement or return is due to “reasonable cause” (i.e. the reporting entity demonstrates that it acted in a responsible manner and the failure is due to significant mitigating factors or events beyond the reporting entity’s control). In Notice 2016-4, the IRS reiterates that employers and other coverage providers that do not comply with these extended due dates are subject to the penalties under 6722 and 6721 for failure to timely furnish or file. However, entities that are required to report but fail to timely report under these extended deadlines are still encouraged to file and furnish these information statements. Also, notice 2016-4 indicates that the IRS will take such furnishing and filing into consideration when determining whether to abate penalties for reasonable cause. The Notice also indicates that the IRS will take into account
- Whether an employer or other coverage provider made reasonable efforts to prepare for reporting the required information to the IRS and furnishing it to employees and covered individuals, such as gathering and transmitting the necessary data to an agent to prepare the data for submission to the IRS, or testing its ability to transmit information to the IRS
- The extent to which the employer or other coverage provider is taking steps to ensure that it is able to comply with the reporting requirements in 2016
Effect of Extended Due Dates on Individuals
1095-C and Premium Tax Credit Eligibility
Notice 2016-4 recognizes that some individual taxpayers that enrolled in marketplace coverage but did not receive a determination from the marketplace that their employer-sponsored coverage was unaffordable (for the purpose of determining eligibility for the premium tax credit under Code Section 36B) may be affected by the extension of the due date for employers to furnish the Form 1095-C. The Notice clarifies that the extended deadline for furnishing the 1095-C will not affect
Employees who enrolled in the employer-sponsored coverage or in other minimum essential coverage that was not offered through the health insurance marketplace (i.e. they are effectively firewalled from the premium tax credit under Section 36B regardless of whether the coverage was affordable or provided minimum value)
Employees who for any other reason would not qualify for a premium tax credit (for example, an employee who qualifies for Medicare or has household income in excess of the limits)
Employee who enrolled in marketplace coverage and received advanced payments of the premium tax credit based on a determination by the marketplace that the employee’s offer of coverage under the employer-sponsored plan was unaffordable
Employees who did not enroll in any coverage
The Notice provides that, for those that enrolled in marketplace coverage but did not receive a determination regarding the affordability of the employer-sponsored coverage from the marketplace, can rely on information received from the employer about the offer of coverage for purposes of determining premium tax credit eligibility when filing their income tax returns and do not need to amend their returns when they receive their 1095-C.
Minimum Essential Coverage and the 1095-B or 1095-C
The Notice also recognizes that some individual taxpayers may be affected by the extension of the due date for providers of minimum essential coverage to furnish them information on the 1095-B or 1095-C for purposes of premium tax credit eligibility under Code Section 36B and the individual mandate penalties under 5000A. Due to the possibility that individuals may file their tax returns prior to receiving the 1095-B or 1095-C, for 2015 only, individuals who rely upon other information received from their coverage providers about their coverage for purposes of filing their returns need not ament their returns once they receive the Form 1095-B or Form 1095-C.
For more information regarding IRS Notice 2016-4 or the ACA reporting requirements, please contact Gabe Marinaro at (231) 486-4540 or firstname.lastname@example.org.