ACA reporting extensions not a given
Large employers are still required to produce and distribute accurate Form 1095-Cs or face stiff penalties.
January is the WORST month of the year for payroll companies. Just as the broker community is taking a deep breath and surviving the end of the fourth quarter, payroll companies are gearing up for “game time.” There are just 30 short days to compile all year-end payroll data and get Form W-2s in the mail to employees. (January 1 is a holiday…)
The January 31 deadline applies statutorily to Form 1095-Cs—the employee-level employer mandate reporting. Presumably, the Form 1095-C deadline was chosen because Congress anticipated that, like Form W-2s, Form 1095-Cs would be required for individuals to file their income taxes. In actuality, that has never actually been the case.
Related: ACA compliance in 2020: An update
I can vividly remember all the calls and questions I got in the Spring of 2016 about this. For that inaugural year of ACA reporting, the IRS extended the deadline for distributing Form 1095-Cs to March 31, 2016, and everyone was confused… Many accountants were requesting copies to complete their clients’ tax returns because that year taxpayers had to certify that they had health insurance to avoid paying individual mandate tax penalties. Employees didn’t understand what the forms were or why they were getting them. I was spending my days writing notices, taking phone calls, and generally screaming from the rooftops that no one really needed to do anything with these forms (except maybe save them with their tax records).
Almost five years later the message has gotten through, and employees and their accountants are generally complacent about these forms—I strongly suspect they typically end up in the circular filing cabinet. That said, large employers are still required to produce and distribute accurate Form 1095-Cs annually or face stiff penalties for failing to do so. The forms remain complicated and, in many cases, need data from Form W-2s to be completed accurately.
Luckily, each successive year since 2016 the IRS has extended the Form 1095-C distribution deadline to the end of February. This has been a boon to employers, payroll providers, and ACA reporting vendors because it has given them the time needed to get the forms done correctly. Surprisingly this year, the annual extension—which I lovingly refer to as my Christmas gift from the IRS—was issued on October 2.
Generally, I never like to look a gift horse in the mouth. But, I’m also quite familiar with the story of the Trojan horse. In this case, I believe the extension came out early because the IRS still hasn’t issued instructions for completing this year’s forms, which have been dramatically revised to accommodate individual coverage health reimbursement arrangements (ICHRAs). Nevertheless, I’m happy to have the extension again, because to be honest, our industry really needs it.
All of that said, I learned long ago to read ALL THE WORDS in IRS notices—even the standard ones—because you never know what you might find. And, I was not disappointed—although I did feel slightly chastised. You see, in the final paragraphs of the notice, the IRS politely reminded the community at large that it requested comments last year about if this extension really was needed and why. Then came my favorite line: “Very few comments were submitted, which indicates that this relief may no longer be necessary.” OUCH!
After I got over the feeling that the IRS was talking to me directly using the same tone and syntax I occasionally resort to with my 12-year old son, I admitted to myself that I really have been taking this extension for granted. That’s been a mistake. It’s important and it’s my job (all of our jobs really) to make sure that the IRS understands that. I was not one of last year’s “very few” commenters. But, I will be one this year because this stuff really does matter. Comments are due by February 1, 2021. I hope you’ll join me because the IRS couldn’t be more clear than they’ve been this year when they (not indirectly) told us all: “Unless we receive comments that explain why this relief continues to be necessary, no relief related to the [timing of ACA reporting] will be granted in future years.”
Jennifer Berman is CEO, MZQ Consulting and senior vice president of compliance at Kelly Benefit Strategies.
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