Although the IRS has mandated Affordable Care Act (ACA) reporting for the past two years, the agency hasn’t issued a single non-compliance penalty (despite multiple warnings). Now, with the ACA in flux – at least in terms of how watered down it may eventually become – many business owners are wondering whether they should even make ACA compliance a priority.
In response, the IRS released four information letters regarding the ACA’s employer and individual mandates that note that the reporting requirement is in full effect and reminding employers exactly what they have to do to stay in compliance. The IRS also noted it is ready and willing to collect reporting penalties!
Specifically, a report by the Treasury Inspector General for Tax Administration (TIGTA) notes that the IRS recently implemented the ACA Compliance Validation System (ACV), a new automated system that not only identifies potentially non-compliant Applicable Large Employers, it will also calculate the “A” penalty under the Employer Mandate. According to the report, the system has a broad reach – identifying non-compliant employers in mass and even picking out any and all reporting years where the company has fallen short.
Although implementation of the ACV was initially delayed beyond its January 2017 launch date, once it is up and running, the IRS will be able to begin issuing large-scale penalties pretty much immediately and the agency has indicated that it expects to net $228 billion in ACA-related fines from the program.
These penalties can be enacted retroactively, so employers should make ensuring compliance a priority and double-check that they have been in compliance in years past.
Should you find that you’ve missed a deadline somewhere along the line, file the correction as soon as possible. The sooner you correct the error, the less likely you will be subject to an oh-so-fun federal audit, said employment attorney David Pixley. Further, the penalties increase as time goes on, with a reporting failure corrected within 30 days subject to a penalty of $50 per return with a $532,000 cap versus a penalty of $100 per return and a cap of $1,596,500 for a correction filed past the 30-day window.
Fixing it – no matter how much time has passed – is always more cost-effective than hoping you’ll go under the radar (since the fines double to $530 per return and the penalty cap disappears altogether for intentional disregard).
Not sure if you’re in compliance with the ACA? Abel HR specializes in ACA coordination and compliance and can help your business with reporting and avoiding fines.