Now that December has arrived, the holiday season is upon us!
While it may feel like there is still plenty of time before the IRS deadlines for ACA reporting for 2022, the deadline to paper file with the IRS will be here on February 28, 2023, and the deadline for e-filing will be March 31, 2022.
With all the complexities of ACA reporting for your business, this doesn’t leave nearly as much time as you’d like!
Therefore, the sooner you get a plan in place and begin the process of ACA reporting, the less likely you are to find yourself in a last-minute crunch.
This article addresses the 5 most common questions that businesses have regarding their ACA reporting requirements.
Businesses about the tax year 2022
1. Form 1095-B or Form 1095-C – Which form to file?
The key to getting started is to know which form your business needs to file. This will impact the information that is required to file successfully with the IRS.
- Form 1095-B is used to report the minimum essential coverage to an individual. Generally, it is filed by,
- Small employers with less than 50 employees offer healthcare coverage to their employees.
- Employers that offer employer-sponsored self-insured health coverage to nonemployees.
- Health insurance issuers and carriers that offer health insurance coverage, including individual market coverage and insured coverage sponsored by employers.
- The government entities that offer programs such as The Children’s Health Insurance Program (CHIP).
- Form 1095-C is filed by Applicable Large Employers, i.e., Employers with 50 or more employees, to report certain information about their employees’ health insurance coverage.
Now, based on the category you fall under these two, you can choose to file Form 1095-C or Form 1095-B applicable to you.
Note: Whichever form you file, you should include the transmittal form 1094-B or 1094-C with your 1095 forms. At least one Form 1094 should be filed for all your employees as a whole. If you file multiple 1094 forms, you should mark one of the forms as authoritative transmittal.
2. Are there any recent updates to 2022 ACA Reporting that I should know about?
The IRS has released the finalized versions of the ACA forms 1095-B and 1095-C.
There are actually no major changes in the forms and the existing ACA codes for the 2022 Tax year.
The last addition made to the codes was for the tax year 2021. The two new codes, 1T and 1U, were added to the list of Line 14 codes of Form 1095-C.
However, there are some IRS updates that you should be aware of when completing your ACA reporting requirements this year.
Every year, the IRS adjusts the ACA affordability percentage based on the federal poverty line percentage. Following the same trend, the affordability percentage for the 2022 tax year is 9.61%.
The affordability percentage for the previous tax year was 9.83%, as you can see there is a slight reduction in affordability.
The IRS has updated and increased the penalties for businesses that fail to meet the ACA employer mandate for the 2022 tax year.
- Section 4980H(a) – the penalty rate is $2750 for failing to offer minimum essential coverage to 95% of the employees and if any employee receives a Premium Tax Credit (PTC) through the marketplace.
- Section 4980H(b) – the penalty rate is $4,120 for failure to offer affordable coverage and not meeting the Minimum Value (MV) resulting in the employee receiving a Premium Tax Credit (PTC) for the 2022 tax year.
Note: The IRS may also impose penalties for not complying with the ACA reporting requirements, such as late filing, incorrect filing, or not distributing employee copies.
3. What Information should I have available before filing?
If you are an employer:
The information you need to have available for ACA reporting includes:
- Basic details of your organization, such as Name, EIN, and Address
- Basic details of your employees, such as Name, SSN, and Address
- Information about the type of coverage provided.
- Details about the dependents covered under your plan.
If you are a health coverage issuer or another coverage provider:
The information you need to have available for ACA reporting includes:
- Basic details of your business, such as Name, EIN, and Address
- Basic details of the responsible individual (the primary person covered under your insurance plan), such as Name, SSN, and Address
- Information about the type of coverage offered.
- Details about all the individuals covered under your plan.
Having all this information available in advance can help save time while preparing your ACA forms. Double-checking that all the information is correct will help you avoid filing corrections later on.
4. Are there any additional requirements other than filing with the IRS?
In addition to filing ACA forms with the IRS, there are a few more additional requirements that businesses are required to fulfill. All businesses must distribute form copies and some may need to file with their state agency. Here’s more information on these requirements.
Some states require employers and coverage providers to file a separate return at the state level because there is a state individual mandate for its residents.
Currently, 5 states have implemented this mandate.
- The District of Columbia
- Rhode Island
- New Jersey
Except for Massachusetts, all these states require you to file the same ACA forms 1094 and 1095 with the state agency too.
If you employ residents of Massachusetts or have a business located in the state, you may need to file Form MA 1099-HC to complete your ACA reporting requirements.
Employee Copy Distribution:
After completing your ACA reporting with the IRS, you should distribute the form copies to corresponding recipients within the specified federal deadline of March 2, 2023.
5. What is the easiest method for filing my ACA forms?
Choosing your method of filing with the IRS is actually a big decision, but it’s also an easy one! The IRS encourages businesses to e-file rather than mail paper forms to the IRS.
If you are planning to file 250 or more forms, the IRS actually requires you to file electronically.
E-filing is also a great choice for businesses because it simplifies the process and takes out the added hassles that come with paper forms. Unlike with paper returns, the IRS will provide you with status updates on your forms. This is extremely helpful in general, but if you have rejected forms you will know as soon as possible that updates are necessary.
The most important of e-filing is choosing a provider that you trust that also provides you with the features you need to file easily for your business.
It is key to choose an e-file provider that is IRS-authorized and offers the features you need for an easy filing process.
It needs to provide a solution for:
- IRS filing
- State filing
- Employee Copy Distribution
Filing multiple forms can take more time. To avoid that, choose a provider that makes it possible to upload your data in bulk.
Intended to ensure error-free returns, TaxBandits has an Internal Audit Check system that reviews your completed forms for any IRS errors before transmission. It is also important to find a provider that has some type of error checks built-in to the filing process, otherwise, you may find yourself making common errors that result in rejected forms.
TaxBandits is a leading e-file provider that offers all of these key features and more for your ACA reporting, and that’s something to keep in mind as the deadlines approach.
Hopefully, this article has helped to point you in the right direction and get you started on the path to successful ACA reporting for the 2022 tax year. Remember, the sooner you assess your business’s requirements and get started, the smoother your tax season will be!