IRS Partially Extends Employer Reporting Deadlines

IRS Partially Extends Employer Reporting Deadlines

Will Keep Good Faith Compliance Standard for 2016 Reporting Done in 2017

On Friday, November 18, the Internal Revenue Service released Notice 2016-70 which extends the due date for furnishing to individuals the 2016 Form 1095-B, Health Coverage, and the 2016 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, from January 31, 2017, to March 2, 2017.  The notice also provides for transitional good-faith relief from penalties related to the 2016 information reporting requirements imposed by IRC §§ 6721 and 6722.  This extension should make it a bit easier for all employers who are applicable large employers (e.g. employers who averaged 50 or more full-time employees including full-time equivalents during calendar year 2015) and/or non-applicable large employers who operate self-funded health plans (including level-funded plans) to complete their employer reporting obligations for the year.

Importantly, Notice 2016-70 does not extend the deadline for employers or coverage issuers to file 2016 Forms 1094-B, 1095-B, 1094-C, or 1095-C with the IRS.  This deadline remains February 28, 2017, if not filing electronically, or March 31, 2017, if filing electronically.  Employers and coverage issuers can apply for an automatic extension of time to file forms 1094-B, 1095-B, 1094-C, or 1095-C with the IRS by submitting Form 8809 or otherwise request additional extensions of time to file.  However, employers and coverage issuers cannot get an additional extension to provide Forms 1095-B and 1095-C to individuals.  Since the IRS has granted broad deadline relief to all filers for individual delivery, they will not grant individual requests for more time, nor will they grant deadline extension requests that have already been submitted.

The IRS acknowledged that the deadline extension to provide people with their Forms 1095-B and 1095-C means that many individuals will not have copies of these forms when they file their personal 2016 income tax returns.  As such, the IRS urges employers and health insurance issuers to provide the Forms 1095-B and 1095-C to employees and covered individuals as soon as they are ready, and not wait until the March 2, 2017, if possible.  However, the IRS has also made it clear that individual taxpayers do not need to wait to receive Forms 1095-B and 1095-C before filing their returns. They can instead rely on other information they have documenting proof of their health coverage to answer tax return questions related to the individual mandate to maintain minimum essential coverage. Individuals do not need to send any of the information they used to document their coverage to the IRS with their individual returns either, but should instead keep the documentation with their personal tax records.

In addition to extending the deadline to provide Forms 1095-B and 1095-C to covered individuals and employees, Notice 2016-70 also provides employers and health coverage issuers with limited penalty relief concerning 2016 information reporting requirements.  This notice protects reporting entities whose 2016 returns or statements accidentally include incorrect and/or incomplete information from penalties, provided that they that can show that they made good-faith efforts to comply with the information-reporting requirements for 2016. This relief applies to missing and inaccurate taxpayer identification numbers and dates of birth, as well as other information required on the return or statement. It does not protect employers and health coverage issuers from penalties for filing their returns or statements late, failing to correct known mistakes, or failing file their returns or issue statements altogether.  The penalties for failing to file returns, filing the returns late, intentional misrepresentations, or failing to fix mistakes are significant.  For 2017 they are as follows:

  • General penalty amount: $250 for each return up to an annual maximum of $3 million per calendar year. The annual maximum for employers with up to $5 million in annual gross receipts is $1 million.
  • Violations corrected within 30 days: $50 for each return up to an annual maximum of $500,000 per calendar year. The annual maximum for employers with up to $5 million in annual gross receipts is $175,000.
  • Violations corrected before August 1: $100 for each return, up to an annual maximum of $1.5 million per calendar year. The annual maximum for employers with up to $5 million in annual gross receipts is $500,000/
  • Violations due to intentional disregard: $500 for each return (or, if greater, 10 percent of the aggregate amount of the items required to be reported correctly) with no annual maximum.

The IRS makes it clear in Notice 2016-70 that their decision to extend the deadline for 2016 and continue good-faith compliance relief for this year was based on the request of many employers, coverage providers, and other interested parties that they need more time gather and analyze the information and prepare the 2016 Forms 1095-B and 1095-C to be furnished to individuals in 2017.  They also recognized the challenges involved in developing new procedures and systems to accurately collect and report information in compliance with new reporting requirements, which influenced their decision to extend good-faith compliance relief for another year.  However, they made a point to note that this current deadline extension has no effect on the effective date or application of other ACA provisions that impact employers and health coverage issuers.  So, for example, employers still need to track employee hours and coverage offers moving forward.  Furthermore, the IRS explicitly noted they do not anticipate extending this transition relief – either with respect to the due dates or with respect to good faith penalty relief – to reporting for 2017 that will be filed in 2018.

Here at Kistler Tiffany Benefits we are committed to supporting all of our affected clients through the employer reporting process.  If you need help finalizing ACA reporting procedures and securing a vendor for your company, please contact you Kistler Tiffany Benefits Consultant.