In 2010, the Affordable Care Act (ACA) was passed and signed into law, requiring employers with 50 or more full-time employees to offer minimum essential coverage to at least 95 percent of their full-time employees. If coverage isn’t offered or if the coverage offered isn’t affordable, the employer can face an IRS assessment known as an Employer Shared Responsibility Payment (ESRP). In 2015, the IRS began to enforce the requirements for employers to report and offer insurance, making it not uncommon for a company with over 100 full-time employees to be assessed an ESRP of more than $100,000.
If the IRS deems that an applicable large employer did not provide a plan to some or all of its full-time employees, the IRS will send a Letter 226J, giving the employer the ability to resolve the proposed ESRP assessment. If an employer fails to respond to the letter, the IRS will follow up with another letter assessing the ESRP.
In cases where the ESRP has already been assessed, those assessments can be removed by providing proof of ACA compliance to the IRS. Another option is to file an appeal to request removal of the assessment.
Employers have an annual requirement to report its compliance to the IRS on Form 1094-C as well as to provide a Form 1095-C to the IRS and each employee. For tax year 2020, the failure to file and furnish these forms results in a penalty of $280 for failure to file Form 1094-C, in addition to a penalty of $280 per employee for each non-filed Form 1095-C.
We’re Here to Help
Bennett Thrasher’s Tax Controversy practice has extensive experience interacting with the IRS office that handles ACA compliance enforcement. In cases in which ACA compliant insurance was provided but the IRS mistakenly proposed an ESRP assessment, our specialists can provide the required response to ensure the matter is resolved in a timely manner.
In cases in which the IRS does not receive Forms 1094-C or 1095-C; receives the forms late; or receives incorrect forms from an employer, penalties can still be mitigated. Many times, these penalties can be abated if the employer can show that it made a good-faith effort to comply with the reporting requirements and submits the missing or corrected forms. Our Tax Controversy practice also assists clients in making these reasonable and good-faith arguments to obtain the best possible outcome.