Employers: IRS Info Request on Your ACA Health Coverage Reporting May Be Coming

The IRS is sending information request Letter 5699 to Applicable Large Employers (ALEs) seeking information on why they are not current with their employee health coverage information reporting.  Employers can view these as reminders. They should act promptly to avoid penalties.

ALEs Use Form 1095-C to Report Employee Health Coverage

The Affordable Care Act (ACA) requires ALEs to annually report to the IRS and furnish to employees information regarding any offer or failure to offer minimum essential health coverage to any full-time employee for the year.  ALEs must file Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, and Form 1094—C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Return with the IRS for each full-time employee.  ALEs must also furnish statements to their full-time employees relating to health coverage.  Employers with 50 or more full-time employees are generally treated as ALEs.

Employers Receiving Letter 5699 Need to Respond

If the IRS does not receive information returns from a taxpayer it believes to be an ALE, it will send the employer Letter 5699, Request for Employer Reporting of Offers of Health Insurance Coverage. The letter asks the employer to confirm its name, EIN, ALE status, and date of any filing. The employer is invited to explain why it has not filed the required returns and any actions it plans to take.

Penalties May Be Imposed

If the employer fails to respond or address the IRS’s reporting concerns, it risks being subject to a late or inaccurate reporting penalty. The maximum penalty amount in the case of intentional disregard is $520 per return for 2016 (inflation adjusted to $530 for 2017 and 2018), with no penalty cap for the employer.  The employer can look for a penalty assessment Letter 5005-A / Form 886A.  Good faith transition relief generally applies, and in any case early cooperation helps to minimize penalties.

2018 Return Deadlines

The deadlines for filing 2018 returns with the IRS are February 28, 2019, for paper filers, and April 1, 2019, for electronic filers. The deadline for furnishing this information to employees was extended from January 31 to March 4, 2019.

By James Solheim, J.D.

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CCHTaxGroup

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