You’ve sent copies of Form 1095-C to all of the employees who need to receive it, transmitted your Form 1094-C to the Internal Revenue Service (IRS) and saved copies of everything in a secure location for future reference. ACA reporting is over and done for the year now, right?
NOT SO FAST…
Filing and distributing Forms 1095-C is just the first step in what can be a rather lengthy back and forth process with the IRS. Let’s break that process down into steps so you can make sure nothing is left undone, leaving you vulnerable to potential penalty risk. If you outsource filing of your ACA returns with the IRS, make sure your ACA reporting provider or third-party vendor is prepared to assist you every step of the way.
WHAT’S YOUR STATUS?
Each IRS submission is processed and assigned a status. Using your unique Receipt ID, you’ll retrieve your IRS Acknowledgment, and use it to find the status of your transmission. Statuses may include:
Processing – The IRS has not completed processing your transmission. Check back later, but if this status persists for more than two days, contact the IRS.
Rejected – When a structural violation is discovered in the transmission file, the transmission may be rejected. You must completely replace the transmission within 60 days (do not use the correction process).
Accepted – The IRS has completed processing your transmission and found no errors. You may still need to file corrections if you or your employee discovers a mistake that caused incorrect information to be reported.
Partially Accepted – The IRS has rejected some (but not all) of the submissions within your transmission. You may use the corrections process to resubmit the rejected returns.
Accepted with Errors – At least one, and possibly all, submissions had errors that require correction. By far the most common IRS transmission status is “Accepted with Errors.”
YOUR TRANSMISSION WAS “ACCEPTED WITH ERRORS” – SO WHAT’S YOUR NEXT MOVE?
Your first step is to download and save your IRS acknowledgment file, then review the IRS error codes inside. You will need to match the IRS record identifier to each employee name, then review the error code for that record to find out what it means. If you work with a third-party vendor for your ACA reporting, make sure they are prepared to help you through this process. If you do your own ACA filing, you’ll want to closely review and understand the IRS Guide for Electronically Filing ACA Information Returns (irs.gov/pub/irs-pdf/p5165.pdf).
Most of your errors are likely due to name/Taxpayer Identification Number (TIN) mismatches. This is generally caused by a conflict between the TIN reported and the information on file for that particular person with the IRS. Most of the time, this means the individual’s name and Social Security Number (SSN) did not match up. To resolve these errors, first check your records to verify the names and SSNs were entered correctly. Look for typographical errors, employees who have recently married (or divorced), and hyphenated or multiple last names. If you still can’t tell what caused the error, consider contacting the employee. The employee can verify the name and SSN listed for themself and any dependents included in the filing matches your HR, benefits and payroll records, or can help you correct any obvious errors.
Important note: If you think an employee may have committed fraud or misrepresentation relating to their initial hiring or employment documentation, contact your legal counsel for next steps before taking any employment action.
Occasionally, employers have difficulty reaching or getting a response from the individual listed on the Form 1095-C. If this occurs, make sure you document all the steps you took to verify the information. You may need this proof later in the event the IRS contacts about your filing.
IRS Publication 1586 provides additional guidance on obtaining (and validating) TIN information.
The general timeline looks like this:
- Request enrollee TINs at an individual’s first enrollment, or at a reasonable time thereafter.
- If no response is received, follow up with a second request within 75 days of the initial request.
- If information is still missing, make a third request by December 31 of the year following the initial solicitation. See Notice 2015-68 and Prop. Treas. Reg. 1.6055-1, 81 FR 50671-01.
You only need to complete this process for your actual employee (or the primary responsible individual covered under your plan). That person should then provide you with information for all covered individuals on the policy. You are not required to solicit a TIN from an individual whose coverage is terminated, but this does not relieve you of the initial TIN solicitation requirements outlined above.
WAIT, HOW DO I FIX THIS?
Now that you have the corrected name and/or TIN information, you need to re-issue corrected Forms 1095-C, update your Form 1094-C (if necessary) and file a corrected transmission with the IRS. Hopefully, you have help or support with this process. If not, carefully review the IRS technical publications and guidance on how to file ACA corrections.
HOW LONG DO I HAVE TO CORRECT THESE ERRORS, ANYWAY?
The IRS says that transmitters should file corrections for “Accepted with Errors” transmissions as soon as possible. Be sure not to miss the step of furnishing a copy of the corrected return to each individual recipient. Note: “Rejected” transmissions must be replaced within 60 days from the original transmission date in order for the new filing to be treated as filed on the date of original submission.
REMINDER! NO MORE “GOOD FAITH EFFORT” RELIEF
For the first few years of ACA reporting, employers relied on generous IRS transition relief that waived penalties for errors like name/TIN mismatches if the employer met required ACA deadlines and could show a “good faith effort” to report on time, accurately and completely. That relief is no longer available. We expect to see the IRS stringently enforcing ACA reporting requirements and associated penalties. It is important for you to document your compliance efforts, and report on time and correctly.
For a deeper dive into the topic of ACA reporting, don’t miss ACAChamp’s session at INCPAS Convention on December 13. Learn more and register.
ACAChamp offers a package of services to help educate employers on emerging ACA requirements, assist them with implementation and ongoing benefit plan compliance, and help communicate plan changes to their employees. Watch a brief demo to see the ways ACAChamp can simplify ACA reporting.