ACA Enforcement Underway, Tax Returns to Face Increased Scrutiny
As we continue to hear about efforts to repeal the Affordable Care Act (ACA), the IRS is continuing to pursue enforcement of its penalty provisions. The requirements under the ACA include individuals obtaining health insurance and the individual mandate which began in 2014, and employers required to offer insurance coverage to their employees and the employer mandate which began in 2015. These ACA mandates contain penalty provisions at the individual level as well as the employer level.
The IRS has already been pursuing enforcement of the individual mandate for calendar year 2014, and is expected to continue this effort for succeeding years. In addition, the IRS has recently published the following statement on its website:
“For the upcoming 2018 filing season, the IRS will not accept electronically filed tax returns where the taxpayer does not address the health coverage requirements of the Affordable Care Act. The IRS will not accept the electronic tax return until the taxpayer indicates whether they had coverage, had an exemption or will make a shared responsibility payment. In addition, returns filed on paper that do not address the health coverage requirements may be suspended pending the receipt of additional information and any refunds may be delayed.
To avoid refund and processing delays when filing 2017 tax returns in 2018, taxpayers should indicate whether they and everyone on their return had coverage, qualified for an exemption from the coverage requirement or are making an individual shared responsibility payment. This process reflects the requirements of the ACA and the IRS’s obligation to administer the health care law.”
As for enforcement of the employer mandate, the IRS completed development of a new system in May 2017. This system will gather data from several sources including health insurance providers, individual taxpayers, employers and insurance exchanges. With the implementation of this new system, the IRS is expected to begin identifying employers who may not be compliant. Non-compliance includes employers who may not have filed applicable ACA forms and employers who have not been offering insurance coverage to their employees. Many employers will be surprised by the amount of penalties that could be assessed. An employer with 100 employees, could face a penalty for not offering coverage of at least $40,000 for 2015 and $150,000 for 2016, and a penalty for not filing IRS Forms 1095-C of at least $200,000 per year.
Employers may want to consider a proactive approach to mitigating this potential issue. We would be happy to discuss your specific circumstances or concerns.
Craig A. Mengel, CPA