Complex ACA Filing Requirements Ahead For Employers, Individuals, IRS Official Says

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By Lydia Beyoud  

May 12 — Much more complexity is coming for both employers and individual employees to understand forthcoming Affordable Care Act-related forms and filing procedures for reporting offers of minimum value health coverage, an Internal Revenue Service official said.

Employers and employees will be asked to provide a significant amount of information, and many are asking why so much information is requested for the administration of tax code Section 4980H, Stephen Tackney, IRS deputy associate chief counsel (Employee Benefits), said May 10 at the American Bar Association Section of Taxation conference.

Code section 4980H, known as the employer mandate, generally imposes an excise tax on applicable large employers that fail to offer full-time employees and their dependents affordable, minimum value health coverage or if at least one employee received a premium tax credit through an exchange.

Final Section 4980H rules (T.D. 9655) issued Feb. 10 provide an additional year of penalty relief, but not reporting relief, for midsized employers with 50 to 99 employees. The employer mandate will apply to about 4 percent of employers in the U.S., according to the Treasury Department.

“We still get questions why all this information is required. It's not just for administration of 4980H, it is also for 36B, which is very important,” Tackney said, referring to rules on the ACA premium tax credit (PTC). The same form will be used to help individuals understand their eligibility for the PTC when filing their Form 1040, U.S. Individual Income Tax Return.

‘Tricky Parts' for Employers

Employers will encounter one particularly “tricky part” when filing their authoritative annual returns listing comprehensive data on offers of coverage to employees, Tackney said. Only one statement should be filed for each full-time employee. “For most people that won't be a problem because they'll have worked in one place the entire time,” he said.

The process becomes more complicated for employees that may have been promoted and thus moved from an insured group of employees to a self-insured group of employees, Tackney said. Employers can file a report for each category of employee, but employers will need to figure out how to file a single form, and which reporting category to use, for employees who have been members of both categories, he said.

A second filing for the same employee would override the first, resulting in incomplete data for that individual and potentially creating an opportunity for the employer to be assessed a penalty for appearing to not have offered affordable minimum value coverage throughout the year, he said.

“If you give me one that says what their offer of coverage was January to June and you give me another one that says July to December, the second one that comes in is going to bump the first and we're going to assume you didn't offer them anything for the other six months, and you're not going to want that to happen,” said Tackney.

Additional Complications

Employers will also need to track an employee's movements from one subsidiary company to another, in which case an employee would show up on the annual filings of both subsidiaries, he said.

Even employees who were only full-time for a single month during a calendar year must be reported, he said. “Once they're in the gate for a full-time employee in any calendar month, they're in.” Employers will be able to provide additional information explaining the situation for the other months, he said.

Employers will have some relief from potential foot faults under the final Section 4980H rules through the alternative reporting mechanisms, Tackney said. “Basically if you give somebody a cheap enough offer based on the federal poverty line, then they are firewalled. There is no way they are not firewalled or that the rest of their family is not firewalled,” he said.

Under one of the two alternative reporting mechanisms, employers can provide a reduced amount of information to the IRS and employees, so long as they can state that they offered affordable minimum value coverage.

“We don't really care exactly what the price was because we know everybody's going to be firewalled, so you can provide us a little bit more limited information and you can also, instead of providing specific information to the employee, you can just tell the employee that because of their offer, they are firewalled,” he said.

“I would stress that a lot of this is going to be in the forms and instructions,” Tackney said, adding that the agency is concerned that employees in particular may be overwhelmed when they receive their reports on offers of coverage for the first year. “This is definitely going to be one of those where, to truly understand this, you're going to have to have the instructions along with the form,” Tackney said.

The IRS welcomes comments on how to simplify reporting for all parties, Tackney said, and recommended that employers provide the instructions with the form when sending reports to employees.

To contact the reporter on this story: Lydia Beyoud at

To contact the editor responsible for this story: Brett Ferguson at

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