At 7:49 a.m. CDT on Friday, October 2, 2015, Integrity Data’s Affordable Care Act compliance team received confirmation from the IRS that test submissions for Tax Year 2014 passed all the check points for electronic filing of employers’ ACA returns.
By earning verification that its ACA reporting software works in the new IRS system called AIR (Affordable Care Act Information Returns), Integrity Data now has clearance to e-file – as soon as the IRS is ready at year-end – Forms 1094-C and 1095-C on behalf of its customers for Tax Year 2015.
At a time when employer uncertainty for the first ACA filing season is such a hot topic, an added detail in this news is significant – and a point of pride for Integrity Data:
We were only the third organization to get this approval.
Integrity Data’s testing was done through AATS (Affordable Care Act Information Returns Assurance Testing System), a portal opened July 29, 2015. AATS is the technical gate not only for filers of the 1094-C and 1095-C forms that are required of employers, but also for filers of the 1094-B and 1095-B returns required of insurers.
Though e-filing is recommended for all ACA returns from employers and insurers, it is mandatory for any organization with 250 or more submissions.
The first electronic transmissions of ACA returns from employers and insurers are due to the IRS by March 31, 2016. Employers, insurers, and any IT department or software vendor filing on behalf of an employer or insurer must allow time to apply for transmission credentials with the AIR system and then, as Integrity Data has, meet the testing requirements unique to the AIR system.
Why the urgency for access to the AIR system?
The new 1095-C and 1094-C returns due from employers represent the most stringent workforce reporting yet. Employers must produce these mega-exacting forms for their employees and then file them with the IRS – for the first time – in Q1 2016.
- Producing 1095-C forms is complicated enough. These year-end statements aren’t just summaries based on wages. They are a year’s worth of monthly declarations of coverage offers and plan attributes – all based on a sophisticated calculation of employee hours in order to document eligibility.
- For files with these super-detailed fields and most-specific codes, getting the transmittal to the IRS (Form 1094-C) in a readable format presents another – and new – set of challenges for the organizations that are e-filing.
This mammoth processing engine, which represents a $921.1 million IRS investment so far, is where enforcement of ACA penalties will happen. When the IRS cross-references these returns in data feeds from the exchanges, individuals, insurers and employers, it will be able to identify where to send penalty notices.
Anyone who already has e-filing credentials with the IRS, and now intends to submit ACA files, must go through an entirely new set of hoops in order to gain access to the AIR system. Credentials with the FIRE system for 1099 returns will not work for transmissions of ACA returns.
What tests must be passed for ACA e-filing credentials?
An Excel-based submission will not be readable in the AIR system.
The only file format the IRS accepts for ACA transmissions is XML, or Extensible Markup Language – a glorified text format where submitters must pay particular attention to spaces, punctuation, and case sensitivity. In monthly conference calls with software developers for the last nine months, the IRS has consistently revised punctuation and letter-case specifications for the code tags. Over the same time, guidance has kept changing for the business logic that the code related to.
To check XML submissions, the AIR system has three test scenarios for the returns that insurers have to submit, and three other test scenarios for the returns that employers have to submit. Integrity Data completed – and passed – the three scenarios for 1094-C/1095-C testing, which included narratives for a self-insured employer, a fully insured employer, and for a government employer.
According to Karakoudas, who has attended all nine IRS conference calls to date for ACA software developers, the scenarios for employers are by far the more complicated tests.
“They wanted to know: Did you conform to the published XML schema? and Do you understand the requirements in order to fill out the forms correctly?” Karakoudas said.
A deterrent for some, but not for Integrity Data’s ACA team
“One critical element missing at this point is error tracking,” Karakoudas pointed out.
“When this testing system is fully implemented, all errors will be listed as to what record is affected. But that’s not the case now. During the testing protocol we just went through,” Karakoudas said, “you were told only three things for each transmission: Rejected, Accepted with Errors, or Accepted.
“If you had any errors, you had to find them yourself.”
According to IRS guidelines for electronic filers of ACA returns, “Software Developers are required to annually pass AATS testing to transmit information returns to the IRS. Transmitters and Issuers are required to complete communication testing to transmit information returns to the IRS the first year only.”
IRS guidelines for e-filing state that “Software Developers must pass all applicable test scenarios for the forms the software package supports, before the software packages are approved.”
What going from ‘T’ to ‘P’ means for Integrity Data customers
According to instructions for the AIR testing system, “all test scenarios within the submission must receive an exact match before the submission can be passed. All submissions for the forms supported by the software must be passed and verified by a Help Desk Assistor before the TCC status changes from “T” (test) to “P” (production).”
Integrity Data’s TCC (Transmission Control Code) status with the AIR system is as a Developer, Submitter and Filer. Because of the three tests that Karakoudas passed, the company now has approval for production transmission.
This means that when the AIR system opens for production in November, Integrity Data will be able to upload the data of any customer who would like the peace of mind that the technical specifications of their ACA files can be vetted well in advance of the filing deadlines.
“Confirmation of our perseverance in navigating evolving IRS processes demonstrates our leadership in being proactive and just how closely we pay attention to our part in ACA compliance,” says Patrick Doolin, CEO of Integrity Data. “As developers of ACA reporting software, we want our customers to have a fuss-free filing experience and not worry about any snags in this new compliance burden, knowing we are taking care of what needs to be taken care of.”
To learn about Integrity Data’s ACA Compliance Solution, visit www.integrity-data.com/software/aca-compliance/.