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Steep Penalties Face Employers That Don’t File Accurate ACA Information Returns

Stack of Files

As part of the Trade Preferences Extension Act signed into law by President Obama in June 2015, employers that fail to file correct information returns with the IRS or fail to provide correct payee statements could face steep penalties[1]. The increased penalties would apply to returns and statements to be filed after December 31, 2015 – specifically Forms W-2, 1099-R, 1099-MISC, 1094-B, 1095-B, 1094-C, and 1095-C, which are due in early 2016.

This change is particularly important for applicable large employers (ALEs) under the Affordable Care Act. Next year marks the first time that they will be required to file Forms 1094-C and 1095-C to report on health insurance coverage for full-time employees.

The basic penalty for failure to file or furnish a correct information return or payee statement will increase from $100 to $250 per return or statement while the standard annual penalty cap will double from $1.5 million to $3 million. It is important to note that the penalty applies separately to failure to file[2] and failure to furnish[3]. Similarly, the penalty (per filing) for intentional disregard increases from $250 to $500. There will be no cap in this scenario.

The IRS may provide temporary relief from penalties for firms that are making a good-faith effort to comply with ACA requirements[4]. However, no relief will be offered for the entities that fail to file in a timely manner or furnish a statement all together.


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[2] Section code 6721 (e)(3)(A)

[3] Section code 6722 (e)(3)(A)

[4], Question 3


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