Treasury Audit Shows Glitches in ACA Reporting Process


Paper information returns submitted to fulfill Affordable Care Act reporting requirements were not timely and accurately processed, according to an audit performed by the Treasury Inspector General for Tax Administration. 

Issued April 7, the TIGTA 2015 tax year audit found that IRS filing season priorities and programming errors prevented paper information returns from being processed. 

Under the ACA, applicable large employers that don’t offer employer-sponsored health care may be subject to a fine. An employer is considered an ALE if they had 50 or more full-time employees or full-time equivalent employees. Employer-sponsored health care must provide minimum essential coverage, be affordable and provide minimum value.  

To monitor compliance, the IRS requires ALEs file information returns to show that they did or did not offer coverage to their employers.  Information reporting includes Forms 1094-C and 1095-C for ALEs and Forms 1094-B and 1095-B for employers that are self-insured but not ALEs. Tax year 2015 was the first year filing ACA information returns was mandatory.

The TIGTA report notes that an estimated 98 percent of Forms 1094-C and 99 percent of Forms 1095-C submitted by paper had not been processed nearly two months after the 2016 filing deadline. Nearly five months after the filing deadline, an estimated 24 percent of Forms 1094-C and 32 percent of Forms 1095-C submitted by paper had not been processed.

The audit also found that the information reporting process was impeded by validation errors that prevented submission data from being formatted correctly and key noncompliant employer identification systems had been delayed, not initiated or cancelled. 

The IRS is in the process of developing alternative systems to identify employer compliance.  The ACA Compliance Validation system, scheduled to begin running in May 2017, will be used to identify potentially noncompliant ALEs and calculate Employer Shared Responsibility Payments, the report said. 

After completing the audit, TIGTA suggested how the IRS could improve the processing of Forms 1094-C and 1095-C. IRS management agreed with six of the seven TIGTA recommendations, the report said. 

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