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Full Steam Ahead: IRS Moves Forward to Collect Affordable Care Act Penalties

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As efforts to reform the Affordable Care Act (the “ACA”) stall in Congress, a recent government report suggests that the Internal Revenue Service is preparing to identify and collect employer shared responsibility penalties.

The Treasury Inspector General for Tax Administration issued the report, Affordable Care Act: Assessment of Efforts to Implement the Employer Shared Responsibility Provision, two weeks after House leadership retracted a bid to repeal and replace the ACA.

The report indicates that the IRS processed over 400,000 Forms 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns) and nearly 110 million Forms 1095-C (Employer-Provided Health Insurance Offer and Coverage) as of last October.  The volume of returns, coupled with an inability to properly process paper returns, has led to a delay in penalty assessment.  The report concludes that despite these difficulties and in spite of efforts to reform the ACA, the IRS will be in a position to begin assessing employer shared responsibility penalties under Code Section 4980H in May 2017.

For a discussion of the employer shared responsibility penalties, see our “Health Care Reform’s Employer Shared Responsibility Penalties: A Checklist for Employers” and for more information on ACA reporting and relief see our November 28, 2016 blog “A Little Breathing Room: IRS Extends ACA Reporting Deadline and Good Faith Penalty Relief.”