Employers should get an early start on new ACA requirements, experts agree

Employers should begin preparing now for the Patient Protection and Affordable Care Act (ACA) tax requirements for 2016 and onward, according to experts at a recent webinar held by Deloitte Tax LLP, Tax Reporting for the Affordable Care Act: Clearing the higher bar in 2016. The speakers stressed the difference employers will see between the 2015 and 2016 tax years.

“I personally think that tax should have a seat at the table throughout the entire [ACA] process,” said Jaime Gross, tax managing director. The webinar highlighted the significant role tax plays in the implementation of the healthcare law.

Employer mandate. The employer mandate under Code Sec. 4980H requires “applicable large employers” to offer “minimum essential coverage” (MEC) for full-time employees and dependents. As of 2016, the employer mandate requires coverage for 95 percent of full-time employees, going up from 70 percent in 2015, the speakers noted. If the IRS finds an employer noncompliant, a $2,160 tax assessment could be issued for all full-time employees.

Additionally, employers must offer MEC to full-time employees that provide value and is “affordable.” Otherwise, it could be required to pay $3,000 per full-time employee if the employee obtained a subsidy, according to the webinar.

Reporting. In 2015, the IRS allowed for a “good-faith” reporting effort by employers. Beginning in 2016, “good faith is a thing of the past,” the speakers agreed. The IRS now imposes a $500 penalty for incorrect, inaccurate or late forms distributed to employees or filed with the IRS, according to the speakers.

Further, the distribution and filing timeline is now compressed by one-third, they added. Beginning in 2017, the distribution deadline for employees is now January 31, and March 31 for filing with the IRS. These dates have been moved up from those for tax year 2015 from March 31 for distribution and June 30 for filing.

Appeals. The speakers cautioned employers from hastily appealing notices from the IRS because of the potential for inaccuracy. Notices may be inaccurate because they are based on incorrect information provided by individuals. Additionally, the speakers noted that the IRS does not confirm prior to notices “even the most basic elements of the employer mandate tax rules, such as whether the individual is a full-time employee or the employer is an applicable large employer.”

Unauthorized subsidies may also trigger an inaccurate IRS notice, but there is no tax reason for appealing an employee’s subsidy eligibility determination, the speakers noted. “Failing to appeal does not undermine the employer’s position with regard to its liability for the employer mandate tax in any way, and has no effect on procedural aspects of tax administration, such as the statute of limitation,” according to the webinar.

“It is important that employers get an early start on ACA readiness for year two,” Gross said. “We want to emphasize that it is so important for employers to begin dealing with it now,” she added.

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