The statute of limitations for tax forms is generally three years. Applicable large employers ((ALE’s) need to be aware of a recent Chief Counsel Memorandum(CCM), which indicates that there is “no statute of limitations on the assessment” of the penalties from Form 1094-C and 1095-C, as the Employer Shared Responsibility Payment (ESRP) cannot be determined until the IRS matches the 1095-C that an ALE files for an employee with the employee’s individual income tax return. In other words, there is no statute of limitations on the 1095-C forms.
As background, ALE’s need to offer affordable and adequate insurance to all their full-time employees in order to avoid paying an ESRP, often referred to as the ‘pay or play’ penalties. After ALE’s file the 1095-C to report their offer of insurance or lack thereof to their full-time employees, the IRS matches it to the tax return for taxpayers who received a Premium Tax Credit (PTC). For details of the CCM see https://www.irs.gov/pub/irs-lafa/20200801f.pdf and remember to keep or not to keep may not be the correct question as it relates to an employer’s ACA forms!
Are your 1094-C and 1095-C forms prepared accurately? If not, it’s time to get them right.
IRS Notice 2020-76 provides a 30-day extension for employers to give their employees form 1095-B and 1095-C for the 2020 reporting year. More importantly, this notice states that the IRS will allow good-faith effort relief from code sec 6721 and 6722 penalties. These are penalties for incorrect or incomplete forms. However, the notice also states this will be the FINAL year of this good-faith relief. This means ALE’s will need to get their 1094-C and 1095-C forms prepared with 100% accuracy for the next filing season. “Of the forms that we review for clients and accounting firms that prepare their own forms, just over 2% are done accurately. This means the IRS is going to be collectinglikely millions of dollars in avoidable penalties going forward” says Tonya Rule, the partner in charge of ACA services for Eide Bailly, LLP. Employers need to review their forms, read the instructions and understand the regulations before filing their ACA forms.
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