Things the Employers Should Know About ACA Penalties

ACA Form 1095 Penalties - An Overview

Updated on October 27, 2022 - 03:00 pm by Admin, TaxBandits

Under the Affordable Care Act (ACA), the Applicable Large Employer (ALE) with at least 50 full-time equivalent employees in the previous calendar year must meet the ACA reporting requirements every year.

Failure to do so may result in a proposed penalty from the IRS of up to a million dollars.

The following is a general overview of the penalties that may apply if an ALE fails to meet the ACA 1095 Reporting Requirements.

Table of Content:

1. The Reasons Why Employers Receive Penalties From the IRS

Employers may receive ACA penalties from the IRS for the following two reasons

  • Failure to comply with IRS reporting requirements (under Sections 6055 and 6056)
    • Failure to file IRS forms on time
    • Failure to provide copies of ACA form to their covered employees on time
    • Filing forms with Errors.
  • Failure to meet the ACA Employer Mandate (under Section 4980H (a) and (b))
    • Failure to provide minimum essential coverage to 95% of their full-time employees every month of the calendar year.
    • Failure to provide affordable coverage to their full-time or full-time equivalent employees.

2. IRS Penalties for Failing to Comply With the Reporting Requirements

According to IRS Sections 6721 and 6722, the IRS may impose penalties on employers for non-compliance with the Affordable Care Act are as follows.

Large Businesses with gross receipts exceeding $5 million:

Date that returns filed/furnished Filing the correct ACA forms within 30 days after the due date File between 30 days after the due date and August 1 Filing on or after August 1 Intentionally neglecting to file
From 01-01-2022 thru 12-31-2022 $50 per return or statement $199,500* maximum $110*per return or statement - $571,000*maximum $280*per return or statement - $1,142,000*maximum $570*per return or statement - No limitation
Due 01-01-2021 thru 12-31-2021 $50 per return or statement - $194,500* maximum $110 *per return or statement - $556,500* maximum $270* per return or statement - $1,113,000* maximum $550* per return or statement - No limitation
From 01-01-2020 thru 12-31-2020 $50 per return or statement $194,500* maximum $110*per return or statement - $556,500*maximum $270 *per return or statement - $1,113,000*maximum $550*per return or statement - No limitation
Due 01-01-2019 thru 12-31-2019 $50 per return or statement - $191,000* maximum $100 per return or statement - $545,500* maximum $270* per return or statement - $1,091,500* maximum $540* per return or statement - No limitation
Due 01-01-2018 thru 12-31-2018 $50 per return or statement - $187,500* maximum $100 per return or statement - $536,000* maximum $260* per return or statement - $1,072,500* maximum $530* per return or statement - No limitation
Due 01-01-2017 thru 12-31-2017 $50 per return or statement - $186,000* maximum $100 per return or statement - $532,000* maximum $260* per return or statement - $1,064,000* maximum $530* per return or statement - No limitation

3. Penalties For Not Meeting the ACA Employer Mandate

The ALEs failing to meet the ALE Employer Mandate may receive Letter 226J from the IRS stating that they are responsible for an Employer Shared Responsibility Payment (ESRP) under section 4980H.

The penalties are calculated by the IRS based on the Form 1094-C and Form 1095-C information submitted
by employers.

Section 4980H (a)

Employers who fail to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time employees and if any employee receives a Premium Tax Credit (PTC) through the marketplace will receive a penalty from the IRS under section 4980H(a).

Under Section 4980H(a), the penalty rate is $2,750 for tax year 2022 and for tax year 2023 the penalty rate is $2,880.

Penalties are calculated by subtracting the first 30 full-time employees from the total number of full-time employees. Employer-sponsored plans and other providers of minimum essential coverage are also included in this calculation.

Section 4980H (b)

An employer who offers coverage to their employees but it's unaffordable and does not meet the Minimum Value (MV) or receives the Premium Tax Credit (PTC) for the month is penalized.

Under section 4980H(b), this penalty rate is $4,120 for tax year 2022 and for tax year 2023 the penalty rate is $4,320.

Here, the penalties are calculated only on the basis of full-time employees who receive the premium tax credit.

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4. Are you facing ACA penalties from the IRS?

If so, don’t worry. We help you file on time, every time with our well-experienced ACA professionals.
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  • Analyze the penalty notices
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To avoid unwanted penalties from the IRS, get started with TaxBandits now and e-file your Form 1095-C and 1095-B. TaxBandits will automatically generate your 1094-C or 1095-B, if you e-file form 1095-B or
1095-C with us.

5. How to Avoid IRS Penalties and Interests?

Receiving penalties plus interests from the IRS can be stressful. Here’s how you can save yourself from the
risk of penalties.

  • File your ACA forms to the IRS on time.
  • File Form 1095-C with the proper information such as TIN, Codes, etc.
  • File using correct media. It means if you file a form on paper when you are required to file electronically, you may incur a penalty.
  • Offer health insurance coverage that is affordable and provides minimum value to full-time employees.

6. Get Started with TaxBandits to avoid ACA penalties from the IRS!

If your business needs assistance meeting ACA filing deadlines this year, get in touch with TaxBandits. We are an IRS-authorized e-file provider who takes care of everything from e-filing forms with the IRS to employee copy distribution before the due date.

With our well-experienced ACA professionals, we will help you:

  • File on time
  • Analyze the penalty notices
  • Respond to the IRS with an acceptable explanation for a late filing
  • Save money by avoiding unnecessary penalties

Our software will also validate your return against the IRS business rules and basic validations to ensures that your forms reach the IRS without errors and the chance of rejection is significantly lower.

File your Form 1095-C electronically before the due date with TaxBandits today!

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