Filing Penalties for ACA forms can happen for a variety of reasons, including forgetting to file or not offering coverage. With the increase of tax enforcement from the IRS due to the Inflation Reduction Act, filers need to be sure that they are up to date with all ACA terms and in compliance with all ACA requirements.
What are Forms 1094-C and 1095-C?
For employers, Form 1094-C, combined with Forms 1095-C, is used to determine whether an Applicable Large Employer (ALE) owes an employer shared responsibility provision (ESRP) payment under IRS section 4980H.
Form 1095-C provides information regarding health coverage offered by an employer for each employee to both the IRS and the employees. A form must be completed for each individual that was a full-time employee for any month of the calendar year, and must be provided to each individual. For employees, this form is used in determining eligibility for the premium tax credit.
Check out our Essential Guides for more information on each form type.
Who is required to file with the IRS?
Each ALE, or ALE Member, must file Forms 1094-C and 1095-C reporting offer of coverage to its employees, even if the ALE Member has fewer than 50 full-time employees on its own. There must be a Form 1095-C for each employee that was full-time for any month of the calendar year, and a copy of the form must be furnished to the employee.
Who is required to file with the state?
Along with the federal filing and recipient furnishing requirements, some states have individual requirements.
California, the District of Columbia, Massachusetts, New Jersey, Rhode Island, and Vermont have Individual Mandates in place that require employers to report ACA data on the state level as well as the federal. Each state may also have filing penalties for ACA forms, in addition to the federal penalties and fines.
Learn more about these state requirements in our ACA State Requirements Guide.
Filing Penalties for ACA Forms
Both types of ACA filings (B-series and C-series) 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 filing penalties for ACA forms.
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.
If you are required to file these information returns and fail to file or fail to furnish forms by the due date, then you may be subject to furnishing and/or filing penalties for ACA forms, such as the following:
- Failure to file correct forms – $310 per form
- Failure to furnish recipient forms – $310 per form
- Failure to file electronically, when required to do so – $310 per form
Special rules apply that increase the per-return and per-statement and total penalties if there is intentional disregard of the requirement to file the returns and furnish the required statements.
Instructions for Forms 1094-C and 1095-C
Check out the graphic below to see how quickly filing penalties for ACA forms can accumulate based on a sample size of 50 forms the business should have filed.
Frequently Asked Questions – Filing Penalties for ACA Forms
What happens if a company determines they are an ALE and have not offered minimum essential coverage to its eligible employees?
All ALEs must make an offer of minimal essential coverage to at least 95% of the full-time employees and their dependents. If not, the ALE may need to make a penalty payment.
If this is the case, then the employer will be liable for the first type of ESRP payment.
- This annual ESRP payment is $2,000 (adjusted annually) per employee, but excluding the first 30 employees. The calculation takes into account all full-time employees (minus 30), including those who have MEC under the employer’s plan or elsewhere.
If at least one of the ALE’s full-time employees receives a premium tax credit (PTC), then they will likely see a penalty. PTCs are the primary indicator for ACA noncompliance to the IRS.
What is the penalty for not providing coverage for only part of the year?
The IRS computes the payment separately for each month there was no offer of coverage. This applies where offers of at least 95 percent of its full-time employees (and their dependents) were made.
If this is the case, then the employer will be liable for the first type of ESRP payment.
- To calculate the monthly ESRP payment, find the annual ESRP payment amount and divide by 12.
- This annual ESRP payment is $2,000 (adjusted annually) per employee, but excluding the first 30 employees. The calculation takes into account all full-time employees (minus 30), including those who have MEC under the employer’s plan or elsewhere.
In the months in which we did not offer coverage, what would happen if one or more of my employees received a Premium Tax Credit?
Premium Tax Credits (PTCs) are an indicator for ACA noncompliance to the IRS. If at least one of the ALE’s full-time employees receives a premium tax credit (PTC), then they will likely see a penalty. This applies even if the ALE Member offers MEC to at least 95% of its full-time employees and their dependents.
If this is the case, then the employer will be liable for the second type of ESRP payment.
- This annual ESRP payment is $3,000 (adjusted annually), but only for each full-time employee that receives a PTC.
- To calculate the monthly ESRP payment, find the annual ESRP payment and divide by 12.
The second type of ESRP payment cannot exceed the amount of the first type of ESRP payment, which is annually $2,000 (adjusted annually) per employee, but excluding the first 30 employees. The calculation takes into account all full-time employees (minus 30), including those who have MEC under the employer’s plan or elsewhere.
What if the ALE is part of an aggregated ALE group?
The 30-employee reduction allocates among all the ALE members in the group in proportion to the number of full-time employees of each ALE member. The IRS calculates the payment based only on the number of full-time employees of the particular ALE member.
What are the annually adjusted filing penalties for ACA forms?
The filing penalties for ACA forms are adjusted annually to account for inflation. The applicable per-employee dollar amounts increase based on the premium adjustment percentage for the year rounded to the next lowest multiple of $10.
| Year | First Type of ESRP Payment | Second Type of ESRP Payment |
|---|---|---|
| Unadjusted Amount | $2,000 | $3,000 |
| 2015 | $2,080 | $3,120 |
| 2016 | $2,160 | $3,240 |
| 2017 | $2,260 | $3,390 |
| 2018 | $2,320 | $3,480 |
| 2019 | $2,500 | $3,750 |
| 2020 | $2,570 | $3,860 |
| 2021 | $2,700 | $4,060 |
| 2022 | $2,750 | $4,120 |
| 2023 | $2,880 | $4,320 |
Conclusion
Keeping up with your compliance efforts will help you avoid filing penalties for ACA forms. This is incredibly important now more than ever, as fine amounts and tax enforcement are increasing. Learn more about ACA filing 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.
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