IRS Extends Deadlines for Individual Statements Under ACA Information Reporting Rules | Practical Law

IRS Extends Deadlines for Individual Statements Under ACA Information Reporting Rules | Practical Law

In Notice 2016-70, the Internal Revenue Service (IRS) extended the 2017 due dates for certain 2016 information reporting requirements under the Affordable Care Act (ACA). The guidance also extends certain good-faith transition relief from penalties that apply regarding ACA information reporting.

IRS Extends Deadlines for Individual Statements Under ACA Information Reporting Rules

by Practical Law Employee Benefits & Executive Compensation
In Notice 2016-70, the Internal Revenue Service (IRS) extended the 2017 due dates for certain 2016 information reporting requirements under the Affordable Care Act (ACA). The guidance also extends certain good-faith transition relief from penalties that apply regarding ACA information reporting.
On November 18, 2016, the IRS announced extensions of the due dates for certain 2016 information-reporting requirements under the Affordable Care Act (ACA) for:
  • Insurers, employers with self-insured health plans, and certain other providers of minimum essential coverage (MEC) under Section 6055 of the Internal Revenue Code (Code) (26 U.S.C. § 6055).
  • Large employers under Code Section 6056 (26 U.S.C. § 6056).
(IRS Notice 2016-70.)
Specifically, Notice 2016-70 extends:
  • The due date for providing individuals the 2016 Forms 1095-B (Health Coverage) and 1095-C (Employer-Provided Health Insurance Offer and Coverage) from January 31, 2017 to March 2, 2017.
  • Good-faith transition relief from penalties under Code Sections 6721 and 6722, so that the relief applies to 2016 information reporting requirements under Code Sections 6055 and 6056.
For analysis of these ACA reporting requirements, see the following Practice Notes:

Code Provisions Involving ACA Information Reporting

As background, Code Section 6055 requires health insurers, employers with self-insured health plans, government agencies, and other providers of MEC to file and furnish annual information returns and statements regarding coverage provided. Code Section 6056 requires large employers (in general, those with 50 or more full-time employees in the previous year) to file and furnish annual information returns and statements regarding the health insurance, if any, offered to their full-time employees.
In addition, Code Section 6721 imposes a penalty for either:
  • Failing to timely file an information return.
  • Filing an incorrect or incomplete information return.
(26 U.S.C. § 6721.)
Code Section 6722 imposes a penalty for either:
  • Failing to timely furnish an information statement.
  • Providing an incorrect or incomplete information statement.
(26 U.S.C. § 6722.)
These penalty provisions apply to information returns and statements required under Code Sections 6055 and 6056.

Deadline Extensions and Penalty Relief for Reporting 2015 Coverage

In December 2015, the IRS extended the due dates for the 2015 information reporting requirements under Code Sections 6055 and 6056 (IRS Notice 2016-4; see Legal Update, IRS Extends Due Dates for ACA Information Reporting). The extensions applied to the deadlines for filing returns with the IRS and for providing statements to individuals.
Also in December 2015, the IRS offered ACA information reporting relief from the penalties for incomplete or incorrect returns or individual statements filed or provided in 2016, under Code Section 6056, for coverage offered during 2015 (IRS Notice 2015-87; see Legal Update, IRS Guidance Addresses HRAs, COBRA, ACA Information Reporting, and TRICARE). Under that relief, the IRS did not impose Code Section 6721 and 6722 penalties on large employers that could show that they made good faith efforts to satisfy the information reporting rules. The relief was unavailable, however, if an employer failed to timely file an information return or provide a statement.
Similar penalty relief was available regarding the Code Section 6055 reporting requirements.

Extended Deadlines for 2016 Individual Statements

Notice 2016-70 provides for an automatic 30-day extension of the due date for providing the 2016 Forms 1095-B and 1095-C, from January 31, 2017 to March 2, 2017. However, regulations allowing the IRS to grant extensions of up to 30 days to provide Forms 1095-B and 1095-C will not apply regarding the extended due date.
The due date extension under Notice 2016-70:
  • Applies only to Code Section 6055 and 6056 information statements for calendar year 2016 provided in 2017.
  • Does not require reporting entities to submit any request or other documentation to the IRS.
The IRS concluded that there is not a similar need for additional time for employers, insurers, and other providers of MEC to file 2016 Forms 1094-B, 1095-B, 1094-C, and 1095-C with the IRS. As a result, Notice 2016-70 does not extend the due dates for filing 2016 Forms 1094-B, 1095-B, 1094-C, or 1095-C with the IRS. The deadlines for filing those forms remain:
  • February 28, 2017, if not filing electronically.
  • March 31, 2017 for electronic filings.
Regarding these forms, Notice 2016-70 does not impact the provisions regarding automatic, 30-day extensions of time for filing information returns, which remain available (by submitting IRS Form 8809).
The IRS notes that employers and other entities are subject to penalties under Code Sections 6722 or 6721 (for failure to timely furnish and file) if they do meet the due dates for:
  • Providing Forms 1095-B and 1095-C to individuals (as extended under Notice 2016-70).
  • Filing Forms 1094-B, 1095-B, 1094-C, or 1095-C with the IRS.
Employers and other entities that do not meet these due dates should nonetheless provide and file the required forms. The IRS will take into consideration the fact that forms were provided and filed (though not timely) in assessing whether to abate penalties for reasonable cause.

Good Faith Transition Relief from Penalties Extended for 2016

The IRS made available transition relief from penalties under Code Sections 6721 and 6722 to employers and other reporting entities that could show that they made good-faith efforts to comply with the information-reporting requirements for 2015 (see Practice Note, ACA Information Reporting: Forms 1094-C and 1095-C: Short-Term Penalty Relief for Good Faith Compliance (2015 Reporting Only)). This relief applied only to incorrect and incomplete information reported on a statement or return and not to a failure to timely provide or file the statement or return.
The IRS indicated in Notice 2016-70 that this good-faith transition relief also will apply regarding the ACA information-reporting requirements under Code Sections 6055 and 6056 for 2016. The transition relief is therefore available for reporting entities that can show they made good-faith efforts to comply with the Code Sections 6055 and 6056 information-reporting requirements (both for providing to individuals and for filing with the IRS) for incorrect or incomplete information reported on the return or statement. The transition relief applies to:
  • Missing and inaccurate taxpayer identification numbers and dates of birth.
  • Other information required on a return or statement.
However, relief is not available for reporting entities that either:
  • Do not make a good-faith effort to comply with the governing regulations.
  • Fail to file an information return or furnish a statement by the due dates (as extended under Notice 2016-70).
In evaluating whether good faith is present, the IRS will consider:
  • Whether an employer or other entity made reasonable efforts to prepare for reporting the required information to the IRS and providing that information to individuals, for example, by:
    • gathering and transmitting the necessary data to an agent to prepare the data for submission to the IRS; or
    • testing its ability to transmit information to the IRS.
  • The extent to which the employer or other entity is preparing to comply with the reporting requirements for 2017.

Practical Impact

The extended due dates under Notice 2016-70, which apply only to furnishing individual statements, are more limited than the relief provided last December for reporting 2015 coverage, which also extended the deadlines for filing 2016 Forms 1094-B, 1095-B, 1094-C, and 1095-C with the IRS (see Legal Update, IRS Extends Due Dates for ACA Information Reporting).
The IRS indicated in Notice 2016-70 that it does not anticipate extending the transition relief under this guidance to reporting for 2017 (regarding either due dates or good faith relief from Code Section 6721 and 6722 penalties). It remains to be seen, however, under the changed political landscape, whether ACA information reporting for 2017 will still be a requirement.
Also, the 30-day due date extension under Notice 2016-70 applies automatically and is as generous as the permissive 30-day extensions to furnish 2016 information statements under Code Sections 6055 and 6056 that have already been requested by some reporting entities in submissions. As a result, the IRS will not formally respond to those requests.