Tax Strategy: Thought Obamacare was gone? Not quite
The Affordable Care Act, in addition to mandating that applicable employers provide insurance and applicable individuals obtain insurance or face penalties, also established reporting requirements to employees, insureds, and the Internal Revenue Service to ensure compliance with the act.
The IRS adopted a series of forms to comply with this reporting requirement. Form 1095-C is to be used by applicable large employers to report coverage that the employer made available to employees for each month of the year. Form 1095-B is used by health insurance providers and self-insured employers to detail actual coverage provided to insureds. Forms 1094-B and 1094-C are transmittal forms for forwarding 1095 forms to the IRS. Employees could utilize these forms to help document required insurance coverage and avoid the individual mandate penalty under the ACA. As of this writing, the 2019 versions of these forms have not yet been finalized.
Due to the complexity of completing the forms, the IRS for several years has extended some of the deadlines for completing the forms. The Tax Cuts and Jobs Act eliminated the individual mandate penalty starting in 2019. (The individual mandate is described as a penalty here, although there has been litigation over the years as to whether it constitutes a tax or a penalty.) However, the Tax Cuts and Jobs Act failed to eliminate any of the related reporting requirements. Starting in 2019, individuals no longer need the 1094 and 1095 forms to document their health insurance coverage to avoid the individual mandate. Still, the law and regulations require the forms to be sent.
The IRS is trying to decide how to handle these reporting requirements for 2019 and future years. For 2019, the IRS has issued Notice 2019-63. It basically continues to require the preparation of the forms as required under the ACA, once again extends some of the reporting deadlines, and permits employers to skip distributions of forms to individuals who are not full-time employees if certain requirements are met.
Notice 2019-63 extends the deadline for distributing the form to employees from Jan. 31, 2020, to March 2, 2020. Because of this extension, the IRS will not entertain requests for additional time. The deadline for submitting the Form 1095-C and related Form 1094-C to the IRS is not extended. It remains at March 31, 2020, for electronic filers and Feb. 28, 2020, for paper filers.
These deadlines, which were not extended, still qualify for requesting an additional 30 days by filing Form 8809.
The IRS also extended its good faith compliance standard to Form 1095-C for 2019. No penalty will be asserted by the IRS for failure to fully comply with the requirements for completing Form 1095-C if the employer can demonstrate that it made a good faith effort to comply with the requirements and the forms were distributed to employees and filed with the IRS by the deadlines.
Option to skip distributions
Notice 2019-63 also provides employers with an option to skip distributions of Form 1095-C to individuals who were not full-time employees in any month in 2019. This would be indicated by Code 1G in the “All 12 months” column of Line 14 on Form 1095-C. In order to qualify to skip such distributions, employers must satisfy a number of requirements:
1. The individual must not have been a full-time employee in any month in 2019.
2. The employer must post a prominent notice on its website that an individual may receive a Form 1095-C by making a request to a specified email address or making a request to a specified street address and by providing a phone number for individuals to ask questions.
3. Finally, the employer must send the Form 1095-C within 30 days of the request.
Insurers and multi-employer plans are also given an option to skip distributions of Form 1095-Bs to individuals if they also comply with the above website notice and the 30-day distribution requirement. This relief to skip distributions does not apply to distributions of forms to full-time employees of applicable large employers, nor does it apply to the requirement to submit the forms to the IRS by the deadlines.
Affordable Care Act filing requirements may be different at the state level than the federal level. Employers and insurers should be careful to track the specific state requirements that may require different filing requirements, deadlines, and forms than the IRS is requiring.
A job is never completed until the paperwork is done. In the case of the individual mandate under the Affordable Care Act, all that is left is the paperwork. These are the rules that the IRS has come up with for 2019 in the face of the repeal of the individual mandate. The IRS is also requesting comments as to how these filing requirements should be handled in future years.