Common Trends in ACA IRS Errors and the Recommended Response Process
The beginning of the year is traditionally a busy time for large employers as they wrap up the prior year's activities and face various local, state, and federal Affordable Care Act (ACA) filing deadlines.
Did you meet the ACA filing deadline?
One of the many deadlines you may be required to meet is March 31 for electronically filing Forms 1094-C and 1095-C with the Internal Revenue Service (IRS). The term "deadline" typically implies you can complete the task on or before the due date; however, that may not be the best approach if you want to minimize potential ACA penalties.
And why is that? Because March 31 was the deadline for filing correct and complete forms. What happens if you receive errors back from the IRS on the due date?
ACA IRS reporting error topics to consider
The Affordable Care Act (ACA) employer mandate requires applicable large employers or "ALEs" (generally those with 50 or more full-time employees and full-time equivalents) to offer affordable, minimum value minimum essential coverage to full-time employees and their dependents or potentially pay a penalty. In addition, ALEs are required to report health coverage information to the IRS on Forms 1094-C and 1095-C each year.
Once Forms 1094-C and 1095-C are transmitted to the IRS, errors are identified and made available to the submitter for review. Errors should be corrected, and forms should be retransmitted as soon as possible once errors are identified. Penalties for failing to file timely, correct, and complete forms can be as much as $330 per form, if filed after August 1, for Forms 1094-C and 1095-C due in 2025, up to a maximum of $3,987,000. Have you budgeted for this potential expense?
Some key questions to help ensure you limit potential penalty exposure are:
- Are you aware of over 130 potential form and file errors that transmitting your forms to the IRS could trigger?
- Do you know who in your organization is tracking errors from the IRS after filing your Forms 1094-C and 1095-C?
- Are there processes in place to address the distinct types of errors? Given that the errors can range from missing data, wrong data, or something more complex having to do with the technical formatting of your file, multiple people in your organization may need to collaborate, depending on the type of error received.
- Most importantly, are the errors resolved and forms updated so they can be retransmitted as corrections on or before March 31? If not, do you have a plan?
Is your organization prepared for potential fees and risk exposure?
The most common errors we see are when the name and Social Security Number do not match what the IRS has on file, either for the employee or one or more of the covered individuals on Form 1095-C. See Help Solve for ACA Social Security Number and Name Mismatch Errors for the steps employers must take to resolve those errors. While some errors may be easier to fix, others may not be and may take time.
ACA compliance and reporting can be a large undertaking for your organization if you do not have a strong strategy. If you are unsure about any of the questions above, you may be at risk for potential IRS ACA reporting penalties in the future.
