Employers know the ACA hasn’t gone away—IRS reporting and compliance never end. Many employers have received an unpleasant surprise in the form of IRS Letter 226J or Notice 972CG. These letters tell them the IRS found something wrong with their 1094 and 1095 ACA reporting or with the health coverage they offered (or failed to offer) their employees. What to do now?
Recently, Ryan Moulder, partner at Health Care Attorneys P.C., presented a webcast covering current ACA compliance issues. The webcast focused on reporting health coverage to federal and state governments and responding to penalty letters from the IRS.
Here are three takeaways for employers:
1. Respond to Letter 226J.
If the IRS sends you Letter 226J, you need to respond to it. Don’t ignore it, and don’t blindly pay the penalty. Odds are good the IRS could reduce or eliminate your penalties based on the facts and circumstances of your situation.
2. Don’t panic over notices of incorrect TIN reporting.
Don’t panic if the IRS says there are problems with your taxpayer identification numbers (TINs). You should always respond to IRS notices and try to make sure you are reporting names and TINs correctly. However, many employers have received TIN error notices even when there was no apparent error. So far, it appears the IRS has not been levying fines for TIN discrepancies when employers made good-faith efforts to report them accurately.
3. Burgeoning state and local individual mandates could cause you to pull out your hair.
In the absence of a meaningful nationwide individual mandate to obtain health insurance, some state and municipal governments are enacting their own individual mandates. New Jersey recently enacted a law requiring employers, including out-of-state employers, to report employee health coverage for 2019 to the state of New Jersey for anyone they cover who lives in New Jersey. California enacted an individual mandate going into effect in 2020. Complying with a patchwork of state and local mandates could quickly become as bewildering as complying with all the various state and local paid-leave laws.
Summary
IRS enforcement of ACA employer penalties is underway. It’s important to report offers of health coverage to the IRS accurately and on time. If you made mistakes in prior years, don’t give up. Engage with the IRS to correct or explain discrepancies, and make every effort to report coverage correctly in the future.
At the time of this writing, it is still unknown what kind of reporting the IRS will require in 2020 and beyond. Regardless, states and municipalities are already enacting their own individual mandates and their own employer reporting requirements. Expect complications.
If you’d like to learn even more, watch the on-demand webcast ACA Compliance Update: 2019-2020. It’s free for International Foundation members!
Additional Resources
- Understanding your Letter 226-J – Internal Revenue Service
- Reasonable Cause Regulations & Requirements for Missing and Incorrect Name/TINs – Internal Revenue Service
Lois Gleason, CEBS
E-Learning/Online Course Instructional Designer at the International Foundation
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