The 2018 IRS filing year is quickly approaching; and employers will once again need to shift their focus to ACA compliance. Much will remain the same for the upcoming IRS ACA reporting year, but there are a few notable changes. To prepare for 2018 ACA reporting, employers should take time to review the upcoming requirements and cultivate a strategy for compliance.
Here are a few changes that employers should be aware of during this filing year.
End of “Good Faith Effort”
The IRS has not extended “good faith transition relief” for the 2018 reporting year and is not expected to do so. In previous reporting years, the IRS did not penalize employers for incorrect or incomplete 1095-C and 1094-C forms, as long as they were able to prove that a “good faith” effort was made to comply with the ACA requirements. Since this will not be available for the 2018 ACA reporting year; it is more important now more than ever to file accurate and complete 1094 and 1095 forms with the IRS AND furnish timely and correct 1095-C forms to employees.
Tax Forms Now Require Indication of Coverage
Starting in filing year 2018, the IRS will not process individual tax returns unless taxpayers indicate whether they have health coverage. This will be the first year the IRS will NOT accept nor process tax returns that omit this information. The IRS announced, “This change in process reflects the requirements of the ACA and the IRS’s obligation to administer the health care law”. So starting this year, electronically filed tax returns that do not indicate whether the individual had health coverage for the year will NOT be accepted. Also, paper tax returns that do not confirm compliance may be suspended, and any refunds due may be delayed.
In previous years, the IRS has accepted and processed returns without health coverage being indicated. However, going forward this will not be the case. Now employees will be required to indicate whether they and their family members had coverage or whether they qualified for an exemption during the filing year. Employees will need to use the information on their 1095 forms to substantiate healthcare coverage for themselves and any covered family members when filing their tax returns. This is another reason why it is extremely important for employers to comply with ACA requirements and provide correct and complete forms in a timely manner this reporting year.
ACA Limits and ACA Penalties
We all should know by now that applicable large employers (ALEs) are required to offer affordable, minimum value health coverage to their full-time eligible employees or pay ACA penalties. As in previous filing years, employers will notice an increase of the ESRP (Employer Shared Responsibility Provision) penalties for the 2018 filing year. The sledgehammer penalty has been increased to $2,320 annually per full-time employee (minus the first 30 FTEs). The tack-hammer penalty has been increased to $3,480 annually per full-time employee who receives a tax credit.
The ACA requirements indicate that health coverage is considered affordable if the employee’s plan contribution does not exceed a set percentage of the employee’s household income for the tax year. Employers should note that the affordability threshold percentage has decreased to 9.56% for the 2018 filing year. Therefore, in order for your medical plan to be considered affordable, it should not exceed this amount.
IRS 226-J Letters Will Continue
The IRS has already begun sending 226-J assessment notices for the 2015 filing year. They are also expected to continue enforcing the employer mandate by sending the assessment notices for future tax years. It is critical that your company maintain its ACA compliance now more than ever to avoid ACA penalties in the future. It is also essential for employers to know what steps should be taken in the event that they receive one of these “love letters.”
Key Factors That Have Remained the Same with IRS ACA Reporting
During the 2018 filing year and future years, employers must continue to:
- Provide affordable coverage that meets minimum value to all full-time eligible employees
- Actively manage employee eligibility for the entire calendar year
- Timely file and furnish accurate and complete 1094-C and 1095-C forms
As always, Integrity Data’s ACA reporting service is here to assist you with this year’s ACA filing. Do you need a refresher on understanding IRS ACA Reporting and Compliance? Then check out our Affordable Care Act 201: Educational Series for Employers. This five-part webinar series will tackle a variety of topics sure to get you back up to speed and ready for 2018 ACA reporting.
In addition, you can visit www.acafluent.com. Here you can find a host of educational resources to view at your convenience to give you a better understanding of how to ensure you are staying in compliance.