December 1, 2021
IRS proposes permanently extending Affordable Care Act reporting deadline until March 2, 2022
In an advanced copy (REG-109128-21) of proposed regulations, the IRS would permanently extend the Affordable Care Act (ACA) reporting deadline for applicable large employers (ALEs) to furnish Form 1095-C, Employer-Provided Health Insurance Offer and Coverage to employees to 30 days after January 31. Until the regulations are finalized, taxpayers may rely on these proposed regulations for calendar years beginning after December 31, 2020, so this 30-day extension can be relied on for the 2021 tax year, making March 2, 2022, the due date for furnishing these forms.
The proposed regulations would also eliminate good faith relief from accuracy-related penalties, beginning with the 2021 tax year.
The preamble to the proposed regulations contains the following concerning the regulations' effective date: "The regulations under [Treas. Reg. Sections] 1.6055-1 and 301.6056-1, once final, are proposed to apply for calendar years beginning after December 31, 2021. Taxpayers may rely on [Treas. Reg. Sections] 1.6055-1 and 301.6056- 1 of these proposed regulations for calendar years beginning after December 31, 2020, and before the date a Treasury Decision finalizing the regulations is published in the Federal Register."
Even though this regulation is proposed, it has immediate impact for 2021 furnishings in 2022 because the automatic 30-day extension can be relied upon for the 2021 tax year.
Comments on the permanent extension are due 60 days after the proposed regulations are published in the Federal Register.
The IRS has granted an automatic 30-day extension for Forms 1095-C every year since the ACA's enactment. In Notice 2020-76, the IRS again automatically extended the due date for furnishing individuals with the 2020 Forms 1095-B and 1095-C to March 2, 2021 (see Tax Alert 2020-2401). The Treasury Department and the IRS received 119 public comments in response to Notice 2020-76 describing the administrative burdens of complying with the January 31 deadline.
The proposed regulations would amend Treas. Reg. Section 1.6056-1(g)(1) to grant reporting ALEs an automatic 30-day extension to furnish Form 1095-C to individuals for the 2022 tax year and beyond. This would eliminate the need for extension requests.
As discussed previously, this 30-day extension also applies to 2021 forms.
The proposed regulations would also amend Treas. Reg. Section 1.6055-1(g)(4)(i) to grant reporting entities an automatic 30-day extension to furnish Form 1095-B. The proposed regulations would also make permanent an alternative method for furnishing the information in Form 1095-B instead of mailing them to individuals.
In Notice 2020-76, the IRS waived penalties for failure to furnish Forms 1095-B (which generally report enrollment of individuals in fully insured health plans) for ALEs that met certain conditions, as the penalty for failing to carry health insurance had dropped to $0 (in the preamble of the proposed regulations the IRS pledged to provide guidance and sufficient time for reporting entities to restart the reporting process if the penalty for failing to carry health insurance increases).
Under the proposed regulations, reporting entities would not be subject to penalties if they post on their website a notice that:
In addition, self-insured ALEs could use the alternative method for part-time employees and non-employees who are enrolled in the ALE's self-insured plan. ALEs cannot use the alternative method, however, for full-time employees who are enrolled in the self-insured plan.
The IRS declined to adopt a commentator's suggestion that a reporting entity provide a link to a member portal without the other required information.
No more good faith relief
Since the ACA reporting requirements first became effective for calendar-year 2015 forms due to be filed in 2016, the IRS has refrained from imposing accuracy-related penalties on health insurers and employers that make a good faith effort to comply with the reporting requirements if they furnished statements to individuals and filed with the IRS on a timely basis. IRS warned in Notice 2020-76 that 2020 would be the final year for accuracy-related penalty relief.
The proposed regulations would eliminate good faith relief from penalties, beginning with the 2021 tax year. The IRS said in the preamble that "[t]hese reporting requirements have now been in place for six years, and transitional relief is no longer appropriate."
Medicaid coverage and COVID-19 testing
The proposed regulations would exclude Medicaid coverage that is limited to COVID-19 testing and diagnostic services provided under the Families First Coronavirus Response Act from minimum essential coverage. Therefore, eligibility for the premium tax credit would not be affected by this type of coverage.
On November 23, 2021, Rhode Island announced that the deadline for employers to file ACA reporting information to the state has been extended to March 31, 2022.
It remains to be seen how the other four states that require Forms 1095-C to be furnished to their residents (the District of Columbia, New Jersey, California and Massachusetts) will respond. As of now, the four states still have a furnishing deadline of January 31, 2022. While the IRS has provided an extension, the states have not adjusted their deadlines to conform to the IRS extension.
Given the focus on accurate forms, this additional time allows employers to pull together complete end-of-year data. Employers with employees in California, the District of Columbia, New Jersey or Rhode Island, should pay close attention to whether these states adjust their respective reporting deadlines. In the meantime, employers should be prepared to furnish forms to those individuals by January 31, 2022.