IRS Offers Limited Penalty Relief for Form 1095-B Disclosures and Extends Deadlines for 2019 Individual Statements Under ACA Information Reporting Rules | Practical Law

IRS Offers Limited Penalty Relief for Form 1095-B Disclosures and Extends Deadlines for 2019 Individual Statements Under ACA Information Reporting Rules | Practical Law

The Internal Revenue Service (IRS) has provided limited penalty relief for failures to furnish 2019 Forms 1095-B to individuals (Notice 2019-63 (Dec. 2, 2019)). Notice 2019-63 also extends the deadlines for furnishing individual statements for 2019 (IRS Forms 1095-C and 1095-B), from January 31, 2020, to March 2, 2020, and provides additional relief for certain penalties under Sections 6721 and 6722 of the Internal Revenue Code (Code).

IRS Offers Limited Penalty Relief for Form 1095-B Disclosures and Extends Deadlines for 2019 Individual Statements Under ACA Information Reporting Rules

by Practical Law Employee Benefits & Executive Compensation
Published on 03 Dec 2019 • USA (National/Federal)
The Internal Revenue Service (IRS) has provided limited penalty relief for failures to furnish 2019 Forms 1095-B to individuals (Notice 2019-63 (Dec. 2, 2019)). Notice 2019-63 also extends the deadlines for furnishing individual statements for 2019 (IRS Forms 1095-C and 1095-B), from January 31, 2020, to March 2, 2020, and provides additional relief for certain penalties under Sections 6721 and 6722 of the Internal Revenue Code (Code).
The IRS has provided limited relief from the Code's penalty provisions for not furnishing 2019 Forms 1095-B to individuals (IRS Notice 2019-63 (Dec. 2, 2019)). This requirement is part of the Affordable Care Act's (ACA's) information reporting and disclosure requirements. The relief relates to a Tax Cuts and Jobs Act (TCJA) provision that reduced to zero the penalty for violating the ACA's individual mandate (Pub. L. No. 115-97 (2017); see Tax Cuts and Jobs Act (TCJA) Compliance for Fringe Benefits and Health Plans Toolkit).
Notice 2019-63 also announces extensions of the deadlines for certain 2019 ACA information reporting requirements applicable to:
  • Employers with self-insured health plans, health insurers, and certain other providers of minimum essential coverage (MEC) under Code Section 6055 (26 U.S.C. § 6055).
  • Large employers under Code Section 6056 (26 U.S.C. § 6056).
Specifically, the notice extends:
  • The deadlines for providing individuals 2019 Forms 1095-C (Employer-Provided Health Insurance Offer and Coverage) and Forms 1095-B (Health Coverage), as applicable, from January 31, 2020, to March 2, 2020.
  • Good-faith transition relief from penalties under Code Sections 6721 and 6722 (26 U.S.C. §§ 6721 and 6722), so that the relief applies to 2019 ACA information reporting requirements under Code Sections 6055 and 6056.
For analysis of the ACA information reporting requirements, see Practice Notes:

IRS Forms 1095-B and 1095-C

As background, Code Section 6055 requires employers with self-insured health plans, health insurers, and other providers of MEC to file and furnish annual information returns and statements regarding coverage provided. Information provided under Code Section 6055 was used to enforce the ACA's individual mandate (26 U.S.C. § 5000A; see Practice Note, Affordable Care Act (ACA) Overview: Individual Mandate).
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, meanwhile, 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 ACA information returns and statements required under Code Sections 6055 and 6056.

Extended Deadlines for 2015, 2016, 2017, and 2018 Reporting Years

In prior guidance, the IRS extended the deadlines for ACA information reporting for the 2015, 2016, 2017, and 2018 reporting years. The 2015 extensions (under Notice 2016-4) applied both to information returns filed with the IRS and statements furnished to individuals. For 2016, 2017, and 2018, the extended deadlines (respectively, Notices 2016-70, 2018-06, and 2018-94) applied only to statements furnished to individuals. For more information on these extensions, see Legal Updates:

Penalty Relief for Furnishing Forms 1095-B

Effective beginning in 2019, the TCJA reduced to zero the penalty for violating the ACA's individual mandate. As a result, individuals do not need the information on Form 1095-B to determine their federal tax liability or file a tax return with the IRS. Because reporting entities must expend resources to furnish Forms 1095-B, Notice 2019-63 provides relief – for 2019 – from Code Section 6722 penalties for failing to furnish Forms 1095-B to individuals. However, this relief is only available if the reporting entity:
  • Prominently posts a notice on its website stating that individuals may receive a copy of their 2019 Form 1095-B on request, and providing contact information so that individuals can send requests or questions.
  • Furnishes a 2019 Form 1095-B to an individual on request within 30 days of the date the request is received.

Relief Generally Does Not Extend to Forms 1095-C, as to Full-Time Employees

Notice 2019-63 clarifies that the IRS's "2019 Section 6055 furnishing relief" does not – subject to an exception – apply to failures to furnish 2019 Forms 1095-C. Large employers that sponsor self-insured health plans generally must use Form 1095-C, Part III (rather than Form 1095-B) to satisfy Code Section 6055. (Regarding this combined reporting, see Practice Note, ACA Information Reporting: Forms 1095-C and 1094-C (Overview): Reporting for Self-Insured Health Plans.) Because of combined reporting on Form 1095-C for full-time employees of large employers enrolled in self-insured health plans, the 2019 furnishing relief does not extend to the requirement to furnish Forms 1095-C to full-time employees. For full-time employees enrolled in self-insured health plans, the IRS will continue to assess penalties for a large employer's failure to furnish Form 1095-C (including Part III).
However, the 2019 furnishing relief does extend to penalty assessments for providing Forms 1095-C to employees enrolled in a large employer's self-insured plan who are not full-time employees for any month of 2019. (This assumes the two conditions for the 2019 furnishing relief, addressed above, are satisfied.)
The 2019 Section 6055 furnishing relief also does not affect penalty assessments regarding failures to timely file 2019 Forms 1094-B, 1095-B, Forms 1094-C or 1095-C with the IRS.

Extended Deadlines for Providing 2019 Individual Statements

Notice 2019-63 extends the deadline for furnishing individuals their 2019 Forms 1095-C and 1095-B, as applicable, from January 31, 2020, to March 2, 2020. The extended due date applies automatically and does not require submission of a request or other documentation to the IRS.
The notice extends the due date to March 2 to provide a full 30-day extension (2020 is a leap year and March 1, 2020, is a Sunday).
Because the notice's extensions are as generous as a permissive 30-day extension for providing 2019 information statements available under implementing regulations (on a showing of good cause), the IRS will not formally respond to those requests. As in years past, the IRS has encouraged employers to provide 2019 individual statements as soon as they can.

Penalties Involving ACA Information Reporting

Employers and other entities that do not timely meet the deadlines for providing individual statements and filing information returns with the IRS under the ACA information reporting rules are subject to penalties under Code Sections 6721 or 6722.

Extension of Transition Relief from Penalties for Incorrect or Incomplete Information

Notice 2019-63 provides transition relief for Code Sections 6721 and 6722 penalties involving incorrect or incomplete information. The relief applies to reporting entities that can show they made good-faith efforts to comply with the information reporting requirements for 2019 (that is, furnishing individual statements and filing information returns with the IRS) under Code Sections 6055 and 6056 relating to incorrect or incomplete information reported on the statement or return.
This transition relief applies to missing and inaccurate taxpayer identification numbers, dates of birth, and other information required on the individual statement or information return.
The transition relief is not available to entities that:
  • Do not make a good-faith effort to comply.
  • Fail to furnish a statement or file a return by the due dates, as extended.
Good faith is based on whether an entity made reasonable efforts to prepare for filing information with the IRS and furnishing statements to individuals (for example, by testing the entity's ability to transmit data to the IRS).

Practical Impact

Employers and other reporting entities will welcome the 2019 due date extensions and the "furnishing relief" for Forms 1095-B, though – as discussed above – that relief is a bit nuanced. Also, although the IRS has extended the ACA information reporting deadlines for several years now, a comment request in the notice asks whether this relief should continue to be provided in the future. Comments in response to this request may be submitted electronically or by mail.