New law raises the stakes on critical ACA compliance task

You know the time has almost come to start reporting healthcare expenses to both employees and IRS. And you’d better get it right. 

Because it just got a lot more expensive to get it wrong.

A blink-and-you-missed-it law passed last month contains a provision that boosts the stakes for this critical portion of Affordable Care Act compliance:

It doubles the penalties for failing to report. And that’s per employee.

Few took note of the Trade Preferences Extension Act when it went into law at the end of June.

But they need to. Because it included a little provision that raised the stakes on compliance with the controversial health reform. And it’s effective for the forms you file at the beginning of 2016.

Here’s what you need to know about the change.

Penalties double – and then some

There’s no slack being cut despite this being the first year employers have to comply with the new reporting requirements.

Your new penalty structure for returns for Tax Year 2015 is:

• $250 per employee for failure to file or furnish a correct information return or payee statement (up from $100). The standard annual penalty cap doubles to $3 million, and
• $500 if you fail to furnish both an information return and a payee statement. The cap there is $6 million.

With stakes that high you can be sure your year-end just got even busier. No room for error on this front.

But what about the one-year transition rule that would forgive penalties for the first year if the reporting errors were made in good faith?

Those appear to hold, despite the penalty jump. But it might not be as much help as you’d think.

IRS has never come out and clarified what will be considered acting “in good faith.” And the latest law changes don’t shed any more light either.

Either way, the relief only applies to filing incorrect or incomplete forms. There’s no mercy if you don’t file.

So how prepared is your company to comply?

Be ready to hit the ground running

Hopefully you’ve been laying the groundwork for January’s and February’s reporting deadlines since this year began.

That included tracking the hours everyone’s worked to know who’s a full time employee in IRS’s eyes and deserves a Form 1095-C.

And remember: All eligible employees have to receive these statements, even if they don’t participate in your company’s health insurance plan.

It’s also a great time to review the instructions for both the 1095-C and the 1094-C. IRS released them earlier this year.

Getting your team familiar with what will be expected of them can prevent some unpleasant surprises during their busiest time of the year.

Info: For instructions on the 1094-C and 1095-C, click irs.gov/instructions/i109495c/ar01.html