Updated December 10, 2020

Penalties for IRS Filing Errors, Including those for Affordable Care Act (ACA) Returns are Significant.

You’ve been generous all along in providing health insurance to every one of your employees. Sure, you’ve heard about the Affordable Care Act’s employer mandate. And you’ve got the gist: Do right by this law to offer a certain standard of coverage – or pay the IRS.

Figure that you’re already compliant, so why sweat, right? All this fuss about some IRS forms for ACA compliance – that’s what less generous employers have to pay close attention to, right?

Not quite.

The letter of the ACA vs. the spirit of the ACA

Complying with the spirit of the Affordable Care Act isn’t enough. You’ve got to comply with the letter of the new health law, too. This added responsibility means that even when you’re doing right by your employees, you’ve got to document (through IRS forms to be submitted annually) that you are also compliant in this respect – in order to be fully ACA-compliant.

You need to document your compliance in monthly breakdowns. So let’s say that you had 50 or more full-time employees, including full-time equivalents. According to ACA regulations, you are an Applicable Large Employer, aka an ALE. As an ALE, you have to do Affordable Care Act information reporting at year-end for the IRS. That reporting includes documenting for the IRS that you offered health insurance to employees who met the ACA definition of full-time, and the attributes of that coverage.

The reporting is done on two IRS forms: 1095-C and 1094-C. So for every month of the year, you need to be keeping records that, at year end, you’ll use to fill out one Form 1095-C for every full-time employee. Employees must receive this form by January 31 of each year. Then, by February 28, you have to file all these 1095-C forms along with their transmittal, IRS Form 1094-C, to the IRS. If you’re e-filing, the deadline is March 31. These dates may move slightly each year depending on what day they fall. See deadlines at right for current year deadlines.

Or pay a significant fine per required return.

For decades, the penalty for failure to report correct information to the IRS was $100 per required return, with a cap of $1.5 million. Failure to report any information was $250 per required form, with a cap of $1.5 million.