Penalties for failure to comply with the Affordable Care Act’s (ACA) provisions for the 2017 and 2018 tax years are expected to rise.
Even if employers that failed to comply with the law have not yet received penalty notices, they are coming. The IRS has announced that penalty notices for the 2015 tax year will begin going out by the end of 2017.
Penalties for failure to comply will increasingly affect applicable large employers (ALEs), organizations with 50 or more full-time or full-time equivalent employees.
What you need to know:
Section 6721/6722 penalties address a failure to file complete and accurate information with the IRS, as well as to provide statements to applicable employees.
- For the 2017 tax year, failure to file and provide employee statements can incur fines of $160 per individual employee return. This will increase to $270 per individual employee return in 2018. Depending on your organization’s size, fines could total nearly $6 million.
- Penalties double for willful failure, and leave the burden of proof on an employer to show that failure to comply was despite “reasonable diligence.”
Section 4980H penalties address a failure to contribute employer shared responsibility payments and to offer Minimum Essential Coverage (MEC) to at least 95% of full time employees.*
- For the 2017 tax year, the penalty for not providing such coverage is $2,260 multiplied by the number of full-time employees.
- ALEs who offer MEC to the requisite percentage of an employee are not liable for the prior penalty but run the risk of penalties if:
- The MEC an employer offers is not affordable
- The MEC an employer offers does not provide “minimum value”; or
- The employee is not one of the at least 95% of employees offered MEC.
- This penalty rate is multiplied by the number of full-time employees who receive a tax subsidy for purchasing coverage through the government healthcare marketplace.
- *It is important to note that the minimum MEC of 95% is not an annual threshold, but rather month to month. Employers need to ensure they maintain 95% coverage every month, or risk potentially facing penalties for periods when they fall below that standard.
Despite the ongoing efforts within Congress and even at the state level to change ACA or even repeal the law, it is vital that all employers maintain compliance. Failing to properly file according to updated IRS forms and laws, will result in significant headaches and potentially steep penalties and fines.
Feeling overwhelmed? Reach out to Sheakley today. We’ll help keep your business on track with complex filing laws and deadlines. Contact us at 1-800-877-5055 to learn more about how we can help reduce your risk and protect your bottom line.