As March 31, 2016 approaches in the world of Affordable Care Act reporting, where one head-scratcher about Form 1095-C best practices often compounds another, a different kind of perplexity is now unfolding.
Counting down to the date marking the 1095-C breather that everyone welcomed for Tax Year 2015 – the March 31 extension of the original February 1 cutoff for employees having the forms in hand, you would think that another overarching 1095-C breather – the unprecedented IRS “good-faith effort” reprieve for thoroughness and accuracy – would be just as welcome among employers that must be ACA-compliant.
Not so, for detail-driven employers that we work with.
In the ACA User Group sessions we host weekly during 1095-C production season, we address the following two points – though we hear back that this IRS gesture is not resonating:
- “Relief from penalties. For 2015 reporting, the IRS will not impose penalties on a filer for reporting incorrect or incomplete information if the filer can show that it made good faith efforts to comply with the information reporting requirements for 2015.” (Form 1095-C/1094-C instructions, Page 5, last paragraph under “Furnishing Forms 1095-C To Employees”)
- “… the IRS will not impose penalties under Sections 6721 and 6722 on ALE members that can show that they have made good faith efforts to comply with the information reporting requirements.” (Notice 2015-87, Part VI, Q&A 26. Sections 6721 and 6722 of the tax code relate to filing penalties for incorrect and incomplete information on required returns.)
ALE is the Affordable Care Act acronym for Applicable Large Employer – that is, every employer in the 50 U.S. states with 50 and more full-time employees, including equivalents. An ALE must offer health insurance of a certain standard to full-time employees or face a penalty. And for every eligible employee, an ALE must document – yearly, in monthly breakdowns, on a 1095-C form – the coverage that is or is not offered.
Personal standard overrides government rule
We are hearing is that, when faced with such new and intensified requirements for workforce reporting – requirements that include filing copies of employees’ 1095-Cs with the federal agency known for always expecting painstaking precision, employers immediately equate “good-faith effort” with “mistakes.”
And that’s not acceptable to them.
Regardless of what official word they have from the ACA enforcement agency.
“The government may not impose a penalty for incomplete or incorrect information on ACA returns, but for me this is a reflection on me and my work. I want the forms to contain correct information for our employees,” says Carol Wright, an HR Specialist/Benefits at Greenleaf Nursery, a Park Hill, Okla.-based business that is an ALE.
Rejecting a gateway to procrastination
The odd reality of this temporary IRS relaxation of rules for enforcement is not a matter that professionals who continuously pore over payroll and benefits data can reconcile with their mantra for employer information reporting:
- Be diligent about getting it right, from the start!
That conflict particularly troubles those who manage long-term strategic planning in addition to day-to-day administrative processes.
“I am actually still quite concerned about making mistakes on the 1095-C,” says Lorraine Wieging, controller at Spherion of Lima, a staffing company in Ohio. “Primarily because if 2015 is wrong, 2016 is going to be wrong. So I want to make sure to get it correct now: Don’t put off till tomorrow what can be done today!”
Understanding what brought about the ‘good-faith’ reprieve
Though the need for 1095-C perfection is arguable for Tax Year 2015, the worry factor over it is significant.
In addressing related questions that we get from time-crunched perfectionists we remind our clients:
“As we go through this journey, it’s natural for all of us – even the IRS – to be worrying a lot. What we’re really talking about here is not accuracy. It’s about coming to terms with the understanding that for the first time since 1944 – when W-2s were first produced – employers are required to do a new type of deep tracking and reporting of information on their workforce.
“And as a result of that, the good-faith reprieve for 1095-Cs is something that is important to acknowledge.
“More than the info itself, the IRS wants conversations to be happening about the info:
- ‘How do I have to comply?’
- ‘What do I have to do?’
- ‘What do I have to report?’
“You probably will never see this again from the IRS, where they say, ‘You know what? It’s OK if the info you send us isn’t exactly correct – just get the processes in place, so that you do get to the point of sending us correct info next year.’”
To review the IRS page with answers to questions at the beginning of an ACA compliance learning curve, click here for the ALE Info Center.
For Integrity Data’s guide in navigating IRS resources for ALEs, click here.
To learn more about Integrity Data’s ACA Compliance Solution, click here.