December 14, 2022
IRS permanently extends Affordable Care Act reporting deadline 30 days and eliminates good faith relief
The IRS and Treasury have issued final regulations (TD 9970) that provide a permanent automatic 30-day extension to 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. Effective for calendar years beginning on or after January 1, 2022, the due date is automatically extended to 30 days after January 31st. The final regulations also confirm the permanent elimination of good faith relief from accuracy-related penalties as of the 2021 tax year.
The final regulations adopt the proposed regulations with some clarifications (see Tax Alert 2021-2165 for a discussion of the proposed regulations).
The IRS has granted an automatic 30-day extension for Forms 1095-C every year since the ACA's enactment. The final regulations 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. If the extended date falls on a weekend or legal holiday, statements are timely if furnished on the next business day. This eliminates the need for extension requests.
The final regulations amend Treas. Reg. Section 1.6055-1(g)(4)(i) to grant reporting entities an automatic 30-day extension to furnish Form 1095-B, Health Coverage, to individuals. The final regulations also make permanent an alternative method for furnishing the information in Form 1095-B instead of mailing the forms 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 individual penalty for failing to carry health insurance had dropped to $0.
Under the alternative method adopted in the final regulations, reporting entities will not be subject to penalties if they post on their website a notice that:
In addition, self-insured ALEs may 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.
No more good faith relief
Since the ACA reporting requirements first became effective for calendar-year 2015 forms required 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. The IRS confirmed the elimination of good faith relief in these final regulations.
Good faith relief from penalties was eliminated beginning with the 2021 tax year. The IRS said in the preamble to these final regulations that these "reporting requirements have now been in place for seven years, and transitional relief is no longer appropriate." In addition, the IRS said the reasonable cause exception under IRC Section 6724 already provides adequate relief from IRC Sections 6721 and 6722 penalties for filers who have reasonable cause for failing to timely or accurately complete their reporting requirements.
Medicaid coverage and COVID-19 testing
The final regulations adopted, without modification, the provision of the proposed regulations excluding 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 is not affected by this type of coverage. This provision applies for months beginning after September 28, 2020.
In the preamble to the regulations, the IRS noted that a commentator had asked that state reporting and furnishing requirements be aligned with the federal requirements. The IRS said it had no authority over the state requirements.
The finalization of these regulations contains no surprises or changes. Employers can now rely on the March 2 deadline for furnishing Forms 1095-C each year (unless the 30-day period falls on a weekend or legal holiday). The 30 days will provide employers additional time to complete these forms without penalties, which may provide welcome relief in certain circumstances, such as coping with a late-year corporate transaction that could make providing these forms by January 31 a challenge. As this date is 30 days beyond the furnishing deadlines for most other calendar year information returns that will be provided to individual taxpayers, however, most employers will continue to try to furnish these forms by January 31 to avoid inquiries from employees about the timing of the furnishing of these ACA forms.
Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor