The Monday before the fourth of July, President Obama signed into law the Trade Preferences Extension Act of 2015, which contained several tax provisions in addition to the trade measures that were the focus of the bill. Among the tax provisions were changes that increase the penalties associated with failure to file or furnish correct “information returns and payee statements,” which include standard information returns, such as Forms W-2 and 1099, as well as the new reporting forms required by the Affordable Care Act (ACA). The following table summarizes the responsible parties and forms applicable to the ACA’s reporting requirements.
| Responsible Entity | Fully Insured Plan | Self-Insured Plan |
| Applicable Large Employer (ALE) 50 or more full-time equivalent employees on average in prior calendar year | Forms 1094-C and 1095-C(Parts I and II of Form 1095-C) | Forms 1094-C and 1095-C(Parts I, II and III of Form 1095-C)Either B-Series or C-Series Forms for non-employees |
| Non-ALE Fewer than 50 full-time equivalent employees on average in prior calendar year | Not required to file | Forms 1094-B and 1095-B |
| Insurance Carrier | Forms 1094-B and 1095-B | Not Applicable |
ACA reporting became mandatory for responsible entities starting in 2015. The first returns and statements will be provided in early 2016 reflecting the 2015 calendar year. Entities completing the employee statement (the 1095-B or 1095-C, as applicable) must provide one copy to employees and one to the IRS as part of the information return. Thus, a failure that relates to both the information return and employee statement may result in double penalties. For example, failure to send one copy of Form 1095-C to the employee and one copy to the IRS is considered two failures, which may trigger a $500 penalty. The IRS has stated that it does not intend to impose accuracy-related penalties on employers who complete the 2015 filings timely, as long as the employer was acting in good faith.
The table below reflects the current and revised penalty structure.
| Penalty Description | Current Penalty | Revised Penalty |
| Failure to file an information return or provide a payee statement | $100 for each return with respect to which a failure occurs | $250 for each return with respect to which a failure occurs |
| Annual penalty limit for non-willful failures | $1,500,000 | $3,000,000 |
| Lower limit for entities with gross receipts not exceeding $5M | $500,000 | $1,000,000 |
| Failures corrected within 30 days of required filing date | $30 | $50 |
| Annual penalty limit when corrected within 30 days | $250,000 | $500,000 |
| Lower limit for entities with gross receipts not exceeding $5M when corrected within 30 days | $75,000 | $175,000 |
| Failures corrected by August 1 | $60 | $100 |
| Annual penalty limit when corrected by August 1 | $500,000 | $1,500,000 |
| Lower limit for entities with gross receipts not exceeding $5M when corrected by August 1 | $200,000 | $500,000 |
| Failure to file an information return or provide a payee statement due to intentional disregard | $250 for each return with respect to which a failure occurs (no cap) | $500 for each return with respect to which a failure occurs (no cap) |
The Filing Extensions
Employers should be able to obtain automatic extensions of time to file the ACA returns with the IRS; however, extensions of time to provide the employee statement (e.g., 1095-B or 1095-C) are more limited. It is our understanding that the IRS intends to revise form 8809—the existing extension form for W-2s and 1099s—to include the ACA forms as eligible for extension. Entities filing form 8809 before the returns are due are granted an automatic 30-day extension. An additional 30-day extension may be requested by submitting a second Form 8809 before the end of the first extension period. Requests for an additional extension of time to file information returns are not automatically granted. Generally, requests for additional time are granted only where it is shown that extenuating circumstances prevented filing by the date granted by the first request.
Extensions for Employee Statements Limited
Employers that require additional time to prepare the employee statements may request an extension of up to 30 days from the original due date (January 31) by submitting a letter to the IRS that contains certain information. There is not an automatic approval process for these types of extensions. The IRS is expected to release further information on the extension process for employee statements.
In the meantime, employers should work closely with their insurance broker and other trusted advisers when determining how their organization will address these new requirements exchanges.
About The Author. This alert was prepared for THE INSURANCE GROUP by Peter Marathas. Mr. Marathas is an ERISA and Executive Compensation lawyer with over 20 years’ experience assisting clients nationally with benefits and compensation matters. He is a partner at Marathas Barrow & Weatherhead LLP, a premier employee benefits, executive compensation and employment law firm. He can be reached at pmarathas@marbarlaw.com or (617) 830-5456.
