The Affordable Care Act (ACA)'s second year of annual reporting is in full swing. So here are three steps you can take to make sure you're in compliance with ACA tax filing.

1. Know the Details Needed

There's a multitude of information you'll have to include when you complete your ACA informational reporting. The earlier in the year you start compiling that data, the easier the process will be.

Here are a few tips to get started.

  • Obtain the social security numbers for your employees' dependents enrolled in your health plan.
  • Have a system in place for tracking the affordability of the coverage you've offered this year. If you use the federal poverty level safe harbor method, your affordability threshold will be the same for every employee. But if you use the rate of pay or W-2 wages safe harbor methods, you need to run calculations for each employee based on their specific compensation. If you haven't been tracking this data during the year, you can run the numbers now to ensure you're on track and make corrections going forward.
  • Know the codes that are used on lines 14 and 16 of Form 1095-C. Put together a written record of whether you offered coverage to spouses and dependents.
  • Have written records of employees who declined your coverage. This will help you prove you shouldn't be subject to the employer mandate penalty, if the need arises. If you didn't have a protocol in place for getting signed waivers from your employees when coverage was declined, consider implementing one. This is not required under the ACA, but it will be useful if you need to prove your offer of coverage was declined.

2. Review Marketplace Notices

If you've received marketplace notices indicating an employee has received subsidized coverage in the exchange, have a strategy in place on how to handle it. If you offered affordable, minimum value health insurance to the employee, you have 90 days to appeal the notice, so don't wait until the end of the year to address the issue.

If your internal review indicates that you failed to offer coverage, or offered coverage that wasn't affordable or didn't provide minimum value, you can take steps to rectify the situation and minimize potential IRS penalties. The employer shared responsibility penalty is pro-rated based on the number of months you didn't offer coverage, according to the IRS.

3. Track Seasonal Employees and Independent Contractors

If your organization is relying on seasonal employees, variable hour employees or independent contractors, ensure your definitions for these positions are aligned with the definitions used by the IRS and DOL. If you've hired workers this year and not offered coverage due to their status as seasonal or variable hour, be sure you implement a measurement period (up to 12 months in length) and track their hours to see if they're eligible for coverage. You'll want to examine your payroll records to determine how many hours those workers have been averaging so you can offer coverage if necessary.

Penalties for noncompliance with the ACA can be steep and can be applied if you failed to offer coverage, offered coverage that wasn't affordable or didn't provide minimum value or even if you did offer compliant coverage but failed to report the details to your employees and the IRS in a timely and accurate fashion. The steps you take now to ensure compliance with the ACA will pay off next year when you're filing your returns.

Tags: aca Tax Credits