Are you aware of the New ACA Penalty from the IRS?

By Raza Hussain, ACA Compliance Analyst

Timely and accurate ACA Reporting continues to be a critical aspect of compliance as the IRS continues to increase their stringent filing requirements. With the IRS’ release of new late filing penalties adherence to currently established filing deadlines are paramount to ensuring a smooth ACA Reporting season and avoidance of potentially severe monetary penalties.  

As a reminder, employers have until January 31^st, 2020 to supply Form 1095-C to all insurance-eligible employees and must subsequently file Form 1094-C (along with copies of each Form 1095-C) with the IRS no later than ether February 28^th, 2020 for employers issuing less than 250 Form 1095-C’s (conducted via paper filing) or March 31^st, 2020 for employers issuing more than 250 Form 1095-C’s (which must be filed electronically). While the IRS has historically granted a 30-day Form 1094-C filing extension, there has yet to be any announcement granting further leniency.

The aforementioned addition of new late filing penalties is actively and aggressively being issued by the IRS to employers via Notice 972CG. The amount of each Notice 972CG penalty is based on a per Form 1095-C basis and fall into one of the following three tiers:

Late Filing Penalty Tier 1: $50 per Form 1095-C for filings submitted within 30 days after the due date, up to a maximum of $536,000 per year (or $187,000 per year for small employers*)

Late Filing Penalty Tier 2: $100 per Form 1095-C for filings submitted more than 30 days after the due and before August 1^st, up to a maximum of $1,609,000 per year (or $536,000 for small employers*)

Late Filing Penalty Tier 3: $260 per Form 1095-C for filings submitted after August 1^st, up to $3,218,500 per year (or $1,072,500 for small employers*)

*Small employers are defined as those with an average gross profit of $5,000,000 or less during the prior three tax years ending prior to the end of the calendar year in which the filing applies.

Employers who receive IRS Notice 972CG must reply to the IRS within 45 days of the notice (or 65 days for employers operating outside of the Unites States) with one of the following three responses:

Option 1: Agree to the proposed penalty (by checking box “A”) and follow the Notice’s payment instructions

Option 2: Disagree in whole with the proposed penalty (by checking box “B”) and supply a signed statement outlining why the penalty should not apply

Option 3: Disagree in part with the proposed penalty (by checking box “C”) and supply a signed statement outlining why the penalty should apply only in part

CXC Solutions is proud to be our clients’ single source of comprehensive Compliance and ACA Reporting solutions; with a strong focus on penalty mitigation and, in many cases, elimination.

Provided is a sample IRS Notice 972CG to assist you in becoming more familiar with these new penalty parameters.