IRS Extends Deadline to Provide Form 1095-C to Employees

On November 22nd, the IRS granted a 30-day extension of time to furnish 2021 Forms 1095-B and -C to employees – making the deadline March 2, 2022. The IRS issued new proposed regulations that would make the extension permanent. The guidance also reiterates that the IRS plans to eliminate penalty relief based on a “good faith effort” by employers who furnish forms that are inaccurate or incomplete.

Background

The Affordable Care Act (ACA) requires Applicable Large Employers (ALEs) to file Forms 1094-C and 1095-C with the IRS and furnish a copy of Form 1095-C to all full-time employees. Non-ALE employers that sponsor a self-insured medical plan must file Forms 1094-B and 1094-B with the IRS and furnish a copy of Form 1095-B to all employees enrolled in coverage. Since the reporting requirement was introduced in 2015, the IRS has extended the deadline to furnish forms to employees every year.

In response to public comments it received regarding the January 31st deadline to furnish Forms 1095-B and -C to employees, the IRS proposes to permanently extend that deadline by 30 days. In most years, that will mean a March 2nd deadline.

Forms 1095-B and -C must be filed with IRS by February 28th (if filing on paper) or March 31st (if filing electronically). Employers filing more than 250 forms are required to submit the forms electronically.

End of Good Faith Relief

Another important change for the 2021 reporting cycle is the end of penalty relief for employers who report incorrect or incomplete information on their forms. In prior years the IRS provided penalty relief if the reporting entity could show they made good faith efforts to comply with the information-reporting requirements. This relief applied to missing and inaccurate Social Security numbers, dates of birth, and other information required on the return or statement. The proposed regulations eliminate the transitional good faith relief from penalties for reporting in the 2021 tax year and subsequent years.

What Now?

With just a little over a month left in 2021, employers should begin preparing now for the March 2nd deadline and begin auditing their reporting data to ensure it is accurate. Plan sponsors that are not confident they have a strong reporting vendor to help them through this process should work with their benefit advisor for assistance in finding a reliable, experienced reporting partner and they should move quickly to secure these services to ensure they can meet the March 2nd deadline. Finally, employers should be sure they and their reporting vendors allocate necessary resources to complete this project during the very busy holiday and year-end season.

Penalties for failure to file or for filing with inaccurate information are steep, ranging from $50/form for forms filed within 30 days of the filing deadline and going up to $280/form if they are filed after August 1, 2022. An additional penalty of $280/return applies if the employer provides late or inaccurate forms to employees and for failure to provide the forms to employees.

Deadline extension notwithstanding, employers will be well-served to start working now to meet the March 2, 2022, deadline.