When the IRS made reporting Affordable Care Act (ACA) a requirement back in 2015, it made employer reporting an obligation. There are two form types that can be submitted: Form 1095-B Health Coverage & Form 1095-C Employer-Provided Health Insurance Offer and Coverage. Failure to fulfill the filing and furnishing obligations with the IRS results in penalties.
Due to this, there became a need for an Affordable Care Act Reporting Tool to help employers determine if they need to file, and if so, which type of filing they should submit.
If you are looking for an interactive Affordable Care Act Reporting Tool to help figure out which forms to file with the IRS, it’s linked at the bottom of the page!
What are the ACA reporting requirements?
Section 6055 is aimed towards health coverage providers and small employers that offer self-funded pans. These filers would use Forms 1094-B and 1095-B for their filings.
Section 6056 is geared toward employers with 50 or more employees, known as an Applicable Large Employers (ALE). An ALE may be a single employer or may consist of a group of related employers (such as parent and subsidiary entities or other related/affiliated entities), called an Aggregated ALE Group. These filers would use Forms 1094-C and 1095-C for their filings.
Both types of information returns require that the filer submit a return to the IRS, any applicable states, and to the recipients. If any of these requirements are not met, then the filer or employer, may be subject to fines and penalties.
Employers run the risk of being penalized for issuing or submitting the incorrect forms to the IRS and recipients. Employers can expect penalty letters if requirements have not been met by the IRS standards. The first letter the IRS sends is letter 5699 which serves as a “warning” letter. If no action is taken, then it is typically followed up with letter 226-J which contains the penalty amount and other information.
Naturally, businesses should strive to avoid getting these letters. In order to do this, filers must fulfill their IRS obligation and submit their recipient forms to the IRS. Although, that is easier said than done, of course.
Should I file B or C series forms?
Once the employer has determined that they must submit a filing to the IRS, the next step is to determine which type of filing should be submitted. This is where the Affordable Care Act Reporting Tool comes into play.
The Affordable Care Act Reporting tool will first verify if the filer is an insurance provider. Next, the tool will use yes/no questions to learn if the filer is an ALE, which will dictate which type of form to file.
ALE classification is fairly simple; it’s based upon employee count. The total number of full-time and full-time equivalent employees the employer had during the previous year will determine ALE status.
- If the number is greater than 50, then it is recommended that they submit a Form 1095-C filing.
- If the number is less than 50, then it is recommended that they submit a Form 1095-B filing.
- Please note: If the small employer has an insurance provider, then they may want to verify if the provider has completed the filing requirements on their behalf.
- If the filer is a health coverage provider (not an employer), then it is recommended that they submit a Form 1095-B filing.
Calculating Full-Time and Full-Time Equivalent Employee Count
Full-time and full-time equivalent employee count may not be as straightforward as it initially seems.
First, let’s define each type of employee count so we can understand how these amounts are calculated.
- A full-time (FT) employee as an employee that averages at least 30 hours of service per week, or 130 hours of service per calendar month.
- A full-time equivalent (FTE) employee as a combination of employees, each of whom individually is not a FT employee, but who, in combination, are equivalent to a FT employee.
The FT employee count will be fairly simple to find; just add up the total number of employees that have an average of at least 30 hours of service per calendar month.
The FTE employee count will be a bit more complex. It isn’t a simple total of employees, but will be a calculation based on the number of service hours across the non-full-time employees.
The number of FTEs should be determined as follows:
- Total the number of service hours that the employer pays to employees during the year.
- There shouldn’t be more than 2,080 hours for any one employee, though.
- Divide that amount by 2,080.
- If the result is not a whole number, then round to the next lowest whole number.
- If the result is less than one, then round up to one.
Affordable Care Act Reporting Tool
Determining which type of filing to complete can be a difficult part of the ACA process, especially if you don’t know how to figure it out. Luckily, there are many tools at filers’ disposal, such as the Affordable Care Act Reporting Tool. It’s very simple to use, with only polar (yes / no) questions to complete.
This tool uses the answers provided to help determine if filing is required and if so, which filing should be completed.
After completing the Affordable Care Act Reporting Tool questionnaire, we recommend checking out our Essential Guide Series for Mastering Form 1095-B and Form 1095-C. These guides will give you the full break down for all things ACA!
When is the deadline to report ACA forms?
Once you’ve determined that you need to file, now you may be wondering “when is the filing due?”
Traditionally, the filing deadlines for Forms 1094-C & 1095-C are as follows:
- Submit a Paper Filing – February 28th
- Furnish Recipient Copies – March 1st
- Submit an Electronic Filing – April 1st
If these deadlines fall on a weekend or legal holiday, then the due date is typically the following business day. Check out our annually updated deadlines article for the most up-to-date information.
Filers may use the Affordable Care Act Information Returns (AIR) system to complete their ACA filings after determining which type is required of them using the interactive Affordable Care Act Reporting Tool.
Although, filers can use the AIR system, this may prove difficult for first time filers. There are a lot of rules and regulations to follow and testing that must be done prior to using the system. Because of this, we recommend finding an ACA software provider to handle the ACA transmission to the IRS. This helps to remove the stress of DIY filing and ensures that everything goes smoothly.
Make sure to check out the Affordable Care Act Reporting Tool by clicking on the button below!
BoomTax, The Boom Post, and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors prior to engaging in any transaction.