On January 12, 2016, the Internal Revenue Service (IRS) added new Q&As (Q&A 30 and Q&A 32) to its Affordable Care Act (ACA) webpages. The Q&As address the deadlines for reduced penalties for ACA information reporting corrections for 2015 reporting. The Q&As expand on the extended due dates for ACA information reporting announced by the IRS in Notice 2016-4 (see Legal Update, IRS Extends Due Dates for ACA Information Reporting).

Section 6056 of the Internal Revenue Code (Code) requires large employers to file annual information returns with the IRS and provide employee statements regarding the health coverage that the employer offers (or does not offer) to its full-time employees (see Practice Note, Information Reporting of Health Insurance Coverage by Large Employers (Section 6056)) (26 U.S.C. § 6056). In addition, Code Section 6055 requires health insurers, employers with self-insured coverage, and other providers of minimum essential coverage (MEC) to file annual information returns and provide statements to individuals regarding the coverage (see Practice Note, Information Reporting for Employers That Self-Insure and Insurers (Section 6055)) (26 U.S.C. § 6055).

For Practical Law analysis of the ACA reporting requirements, see:

In Notice 2016-4, the IRS announced extended due dates for the ACA information reporting requirements for 2015 reporting years, including statements provided to individuals. The Notice provided extended due dates for:

(See Legal Update, IRS Extends Due Dates for ACA Information Reporting.)

The Code imposes penalties relating to information returns and statements, which include penalties for returns or statements containing incorrect or incomplete information (26 U.S.C. §§ 6721 and 6722). These provisions provide for two tiers of reduced penalties that address, respectively:

(26 U.S.C. §§ 6721(b) and 6722(b)).

According to the Q&As, it appears that the following deadlines apply regarding the penalties for correcting returns and statements. For statements provided to individuals under Code Sections 6055 and 6056, any failures that reporting entities correct by:

(See Practice Notes, Information Reporting for Employers That Self-Insure and Insurers (Section 6055): Statements Must Be Provided to Individuals and ACA Information Reporting: Employee Statements).

For information returns filed with the IRS on paper under Code Sections 6055 and 6056, any failures that reporting entities correct by:

For information returns filed with the IRS electronically under Code Sections 6055 and 6056, any failures that reporting entities correct by:

(See Practice Notes, ACA Information Reporting: Forms 1095-C and 1094-C (Overview), ACA Information Reporting: Forms 1095-C and 1094-C Line Instructions and Information Reporting for Employers That Self-Insure and Insurers (Section 6055): Information Returns Must Be Reported to the IRS.)

The extensions under these new Q&As for reduced penalties involving corrections do not affect existing penalty relief for incomplete or incorrect returns or statements regarding 2015 ACA information reporting. This penalty relief involves good faith compliance relief (see Practice Note, ACA Information Reporting: Forms 1095-C and 1094-C (Overview): Short-Term Penalty Relief for Good Faith Compliance (2015 Reporting Only)). Also, reporting entities that fail to timely satisfy the information reporting rules may be eligible for penalty relief if the IRS determines that certain reasonable cause standards are satisfied (26 U.S.C. § 6724).

Because this is the first year that returns and statements must be provided, and these requirements are both unfamiliar and complicated, many large employers and insurers may find themselves needing to correct information involving the ACA information reporting requirements. As a result, the lower penalty amounts for these corrections, whether for 30-day or August 1 (as extended) corrections, could result in significantly reduced penalties.

In another Q&A, the IRS indicated that it does not anticipate any additional extensions regarding ACA information reporting.