Extension for Furnishing Forms 1095-B and 1095-C to Individuals
The Treasury Department and the Internal Revenue Service (IRS) issued IRS Notice 2016-70, which provides a 30-day extension (to March 2, 2017) for furnishing 2016 information statements under the Affordable Care Act (ACA) to individuals, and extends good-faith transition relief from penalties. It does not extend the due date for filing information returns with the IRS.
The ACA added sections 6055 and 6056 to the Internal Revenue Code (Code), which require health coverage providers (i.e., insurers and self-insured plans) and "applicable large employers"1 to report to employees and to the IRS if health coverage was offered and if the employee had coverage. The IRS issued final regulations in 2014 that set forth deadlines for filing that information and issued Forms 1094-B, 1094-C, 1095-B, and 1095-C to report this required information. The 1094 forms are provided to the IRS only, while the 1095 forms (employee statements) are provided to both employees and the IRS.
Large employers/plans or their administrator (large employers must send regardless if insured or self-funded)
- Form 1095-C to individuals
- Form 1094-C (with copies of the 1095-C forms attached) to the IRS
Insurers and self-insured small employers/plans
- Form 1095-B to individuals
- Form 1094-B (with copies of the 1095-B forms attached) to the IRS
Non-compliance with the applicable due dates will result in penalties under Code sections 6721 or 6722 for failure to timely furnish or file, i.e., up to $260 per participant capped annually at $3,178,500.
Summary of Notice 2016-70
- 30 Day Extension for Employee Statements: The Notice extends the deadline for employers and insurers to issue statements to employees on Form 1095-B or Form 1095-C from January 31, 2017 to March 2, 2017. An additional 30-day extension will not be available.
- No Extension for IRS Filings: Notice 2016-70 does not extend the due dates for filing Forms 1094-B, 1095-B, 1094-C, and/or 1095-C with the IRS. Therefore, the due dates for filing transmittal forms with the IRS remain as February 28, 2017, if filing by mail, or March 31, 2017, if filing electronically. However, up to two automatic 30-day extensions are available under the normal rules by submitting a Form 8809.
- Extension of Transition Relief from Penalties: The Notice extends transition relief from penalties under sections 6721 and 6722 to reporting entities that can show that they have made good-faith efforts to comply with the information-reporting requirements (both for furnishing to individuals and for filing with the IRS) for incorrect or incomplete information reported on the return or statement. This relief applies to missing and inaccurate taxpayer identification numbers and dates of birth, as well as other information required on the return or statement. In determining good faith, the IRS takes into account whether an employer or insurer made reasonable efforts to prepare for reporting the required information, as well as the extent to which the employer or insurer is taking steps to ensure that it will be able to comply with the reporting requirements for 2017. In addition, the IRS may abate the penalties for late filers who substantiate that the late filing was due to reasonable cause. However, no relief is provided in the case of reporting entities that do not make a good-faith effort to comply with the regulations or that fail to file an information return or furnish a statement by the due dates.
- Guidance for Individual Taxpayers: Notice 2016-70 also provides guidance to individuals who plan to file their 2016 income tax returns before March 2, 2017. The Notice states that taxpayers do not have to wait to receive Forms 1095-B and 1095-C before filing their returns, rather they may rely on other information received from their employer or insurer for purposes of filing their returns, including determining eligibility for the premium tax credit and confirming whether they had minimum essential coverage. Taxpayers need not send the information relied upon to the IRS along with their tax returns but should keep it with their tax records.
Action Needed Now: In order to meet the deadlines, employers and insurers should continue to gather the required data, prepare returns, and run tests on their systems for the electronic transfer of information to the IRS.
Cheiron Observation: The extended deadline for furnishing the individual statements is particularly useful to employers and insurers for gathering December data, however it does not relieve employers and insurers from the requirement to engage in good-faith compliance with the reporting requirements under sections 6055 and 6056.
Cheiron consultants can assist you with your ACA reporting obligations.
Cheiron is an actuarial consulting firm that provides actuarial and consulting advice. However, we are neither attorneys nor accountants. Accordingly, we do not provide legal services or tax advice.
1 Generally, "applicable large employers" are employers with 50 or more full-time employees (including full-time equivalent employees).