Our ACA Reporting Software Helps Streamline Compliance Management and Filing
This post is for Applicable Large Employers (ALEs) required to comply with the Affordable Care Act. We hope you find it useful.
The IRS issues penalties for late furnishing of 1095-Cs to full-time employees and late filing. The IRS recently ended good-faith transition relief, which applied to the 2015-2020 tax years. Now good-faith transitional relief will not apply for any tax year following 2020. Transition relief provided exemption from penalties to ALEs who could explain why they did not file correct and complete information returns.
It is important that companies furnish and file accurate forms in a timely manner to avoid potentially costly penalties. Late or inaccurate filing penalties could become steep, depending on the number of returns that need to be filed.
If you are manually tracking or overwhelmed by ACA compliance management, our ACA software and services can help you simplify and comply.
Fluctuating employee status can affect a company’s classification as an Applicable Large Employer, as well as if a company grows beyond the threshold of 50+ full-time or full-time equivalents.
According to the IRS, “If an employer has fewer than 50 full-time employees, including full-time equivalent employees on average during the prior year, the employer is not an ALE for the current calendar year. Therefore, the employer is not subject to the employer shared responsibility provisions or the employer information reporting provisions for the current year…
If an employer has at least 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is an ALE for the current calendar year, and is therefore subject to the employer shared responsibility provisions and the employer information reporting provisions.
To determine its workforce size for a year, an employer adds its total number of full-time employees for each month of the prior calendar year to the total number of full-time equivalent employees for each calendar month of the prior calendar year and divides that total number by 12.”
Employees working at least 30 hours per week for more than 120 days in a year are considered full-time. Part-time workers are also counted using the “full-time equivalent” formula: Add the total number of hours worked by all part-time employees in a month and divide by 120.
Our comprehensive ACA software provides status updates that indicate when an employee is trending towards full-time, alerts when an offer of coverage is needed, and it helps ensure that coverage falls within the affordable range based on IRS criteria.
IRS Notification Letters
IRS Letter 5699, or the Missing Information Return (Forms 1094/1095-C) Letter, is sent to businesses that may be non-compliant with ACA reporting requirements for the specified tax year. This notification is issued to ALEs that did not file for an identified tax year and gives companies an opportunity to correct and file any forms for the applicable tax year.
Letter 5699 indicates the IRS believes a company might be an ALE and details the requirements for filing. This letter requires a response indicating whether a business is or is not an ALE and why they are filing late. Failure to respond will result in IRS Letter 5698, which reminds the company to respond to Letter 5699.
Failure to respond to Letter 5698 results in the IRS issuing Letter 5005-A, which proposes penalties via Form 886-A based on the number of W-2s filed for the year.
Filing forms 1094/5-Cs late may trigger an Employer Shared Responsibility Payment (ESRP) assessment, based on the information filed. If the filed information is accurate, the assessed penalty amount will be correct. If the returns were filed with incorrect/missing information, another response to the IRS may be necessary.
For tax years prior to 2021, good faith transition relief may cover inaccurate/missing information Forms 1094/1095-C, exempting the ALE from late/inaccurate filing penalties.
Passport Software’s IRS-certified ACA software helps you streamline compliance management year-round and avoid filing errors. Both filing errors and non-compliance can result in costly penalties.
According to the IRS, “The employer shared responsibility provisions were added under section 4980H of the Internal Revenue Code by the Affordable Care Act. Under these provisions, certain employers (called applicable large employers or ALEs) must either offer health coverage that is ‘affordable’ and that provides ‘minimum value’ to their full-time employees (and offer coverage to the full-time employees’ dependents), or potentially make an employer shared responsibility payment to the IRS, if at least one of their full-time employees receives a premium tax credit for purchasing individual coverage on a Health Insurance Marketplace (Marketplace), also called the Exchange.”
The 4980H(a) penalty is issued to an ALE that fails to offer minimum essential coverage to 95% of full-time employees and their dependents. The 4980H(b) penalty is levied when an ALE fails to offer affordable or minimum value coverage to applicable employees and their dependents.
Minimum Essential Coverage is coverage that satisfies the Individual Mandate requirements, and Minimum Value refers to a plan that covers at least 60% of average costs and provides substantial coverage for inpatient and physician services.
Letter 226-J issues the initial assessment of a 4980H penalty, and if there were filing errors, the information needs to be corrected. You must also respond to the process outline in the letter, which may be time consuming.
Our ACA software and Full Service option can help you streamline year-round to avoid penalties and help ensure correct filing. If you do receive an IRS notification or penalty letter, our friendly experts can help you respond.
If you are late ACA filing, need to file for previous years, or are overwhelmed by compliance management, Passport Software can help.
If your business receives an IRS notification or penalty letter, it is crucial to respond in a timely manner. If you do not respond, the IRS will presume their initial ESRP or late filing penalty assessment is accurate. We provide penalty response consultation services and have helped many companies avoid or drastically reduce penalties.
– Passport Software’s IRS-certified ACA reporting software helps you streamline filing and compliance management throughout the year.
– We are IRS-approved for proxy submission on behalf of our ACA software customers.
– With the ACA Full Service option, we do it all for you year-round, including filing.
– Our friendly experts can walk you through the entire process and answer any ACA-related questions you might have.
Passport Software’s ACA solutions allow you to monitor full and part-time employee data throughout the year, including projections months ahead of time. We also seamlessly handle multi-company consolidation and have been providing IRS-approved Affordable Care Act solutions since 2015.
To learn more about how our ACA software and services can ease the burden of compliance, call 800-969-7900. Or, contact us – we are here to help.