In October, the Internal Revenue Service (IRS) published updated versions of Affordable Care Act Forms 1094-C and 1095-C, as well as the instructions for how to complete the forms for tax year 2017. Forms 1094-C and 1095-C are used by Applicable Large Employers (ALEs) to report on employer-provided health insurance offers and coverage. The updated 2017 1095 forms and other documents for reporting can be accessed at the following links:
Note: The above documents for 2017 reporting replaced those for 2016 on the IRS website. The URLs for the 2017 documents remain unchanged from the previous year, so there is no need to update your bookmarks!
While changes to ACA forms and filing requirements can be difficult to follow, the ACA team at Equifax is here to help. We have reviewed these documents to deliver a brief overview of what’s new and notable. Not much has changed from the previous year, but here’s what we think you should know:
Updated Forms and Instructions
The following changes can be found in Forms 1094-C and 1095-C and their instructions for tax year 2017:
- No transition relief is available for 2017. Accordingly, the instructions have been revised to remove that discussion, and Line 22, Box (c) and Part III, Column (e) of Form 1094-C are now designated as “Reserved.”
- The instructions now clarify that paper returns filed with the IRS must be printed in landscape format.
- Due dates to furnish 1095-Cs to employees and file with the IRS are updated in the instructions. For tax year 2017, 1095-Cs must be furnished to employees by January 31, 2018, and 1094-Cs and 1095-Cs must be filed with the IRS by April 2, 2018 (March 31, 2018 falls on a Saturday).
- The instructions provide further clarification on filing corrected returns. Pursuant to IRS Notice 2017-9, de minimis errors do not need to be corrected unless the employee requests a corrected form. The 2017 instructions elaborate, stating that:
“Forms 1095-C filed with incorrect dollar amounts on line 15, Employee Required Contribution, may fall under a safe harbor for certain de minimis errors. The safe harbor generally applies if no single amount in error differs from the correct amount by more than $100. If the safe harbor applies, you will not have to correct Form 1095-C to avoid penalties. However, if the recipient elects for the safe harbor not to apply, you may have to issue a corrected Form 1095-C to avoid penalties.”
- A new “TIP” in the instructions refers filers to the Questions and Answers about Information Reporting by Employers on Form 1094-C and 1095-C page on the IRS website for additional information and examples about reporting offers of COBRA and post-employment coverage.
- The instructions now clarify that no specific Line 17 indicator code exists to indicate that a full-time employee was offered coverage but chose not to enroll.
- Each year, the IRS adjusts the section 4980H affordability safe harbor percentage to account for inflation. The instructions now reflect the tax year 2017 value of 9.69%.
Updated IRS Filing Guidance
Although the changes to the 1094-C and 1095-C forms and instructions for 2017 are minimal, the IRS did take advantage of the offseason to issue new guidance and overhaul its ACA Information Returns (AIR) e-filing system.
- AIR System Updates: The IRS added and updated a number of business rules (133 by our count!) for validating transmittals of 1094-Cs and 1095-Cs. Perhaps most impactful for large employers, 2017 is the first ACA tax reporting year in which the IRS will validate dependents’ reported dates of birth (if SSN/TIN was not available) against names on file in the IRS database. This new business rule could result in far more errors, just like Tax Identification Number (TIN) mismatches accounted for numerous errors in previous years. With that in mind, it is extra important this year to validate dependents’ birth dates to prevent – or at least lessen – the risk of noncompliance with ACA reporting provisions and reduce the number of corrected forms that must be refiled with the IRS.
- Individual Shared Responsibility Reporting Requirement to be Enforced: In reporting for tax year 2016, the IRS accepted returns from individuals that did not answer questions regarding ACA health coverage requirements. On its ACA Information Center for Tax Professionals page, the IRS released a statement that, for tax year 2017, returns that fail to answer these questions will be rejected or suspended: “The IRS will not accept the electronic tax return until the taxpayer indicates whether they had coverage, had an exemption or will make a shared responsibility payment. In addition, returns filed on paper that do not address the health coverage requirements may be suspended pending the receipt of additional information and any refunds may be delayed.”
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