Affordable Care Act
The Affordable Care Act,or Obamacare as it's also known, is a set of healthcare reform legislation signed into law in 2010. The ACA works to help improve the quality of health care and health insurance in America. In order for everyone to remain compliant under these new laws, the IRS updated the Internal Revenue Code to include Sections 6055 and 6056, which require providers of insurance and certain employers to report information on the coverage they offer each year on Form 1095-B and Form 1095-C. 2015 is the first tax year for which these ACA forms are required to be filed.
ACA Tax Penalties
With new requirements come new penalties. You can incur IRS ACA penaltie by failing to comply with the new ACA requirements. Individuals can incur penalties for not having enrolled in health insurance coverage by a certain time. And providers and applicable large employers (ALEs) can face steep penalties if they fail to provide insurance or fail to report their ACA information returns to the IRS and/or their recipients correctly, on time, or at all.
Ways to Incur an ACA Penalty
Individuals
Individuals can incur ACA penalties if they, their spouse, and/or their dependents don’t have qualifying health insurance coverage, but are able to afford it and didn’t apply for any exemptions
Providers
Employers and other providersof coverage can incur penalties if they don’t provide enough coverage or coverage that meets the ACA deadlines to at least 95% of their recipients . They can also receive penalties for not reporting coverage information (or reporting late) on the IRS ACA forms.
ACA Penalty Fees
Individuals
The individual penalty is calculated one of two ways. For 2015, this fee is 2% of household income or $325/adult, $162.50/child not exceeding $975. For 2016-2018, the fee is 2.5% of household income or $695/adult, $347.50/child not exceeding $2085. After December 31, 2018 the amount of the individual shared responsibility payment is reduced to zero.
Providers
Employers who offer coverage to less than 95% of their employees pay a penalty of 1/12 of $2880/full-time employee, except for the first 30 employees. Employers who offer coverage that doesn’t meet ACA standards but offer to 95% of their employees pay a fee of 1/12 of $4,320/PTC-receiving full-time employee per month.
ACA Penalty Exemptions
Individuals
The Qualifying Offer Method is an exemption for employers who provide a qualifying offer to any of their full-time employees, and for 2017 there is Qualifying Offer Method Transition Relief for those who provided offers to 95% of their employees. The 98% Offer Method is for those who offer a qualifying method to 98% of their full-time employees. For 2017, the IRS is also providing Section 4980H Transition Relief to ALEs.
Providers
Employers and other providers of coverage can incur penalties if they don’t provide enough coverage or coverage that meets the ACA deadlines to at least 95% of their recipients . They can also receive penalties for not reporting coverage information (or reporting late) on the IRS’s ACA forms.
How to Avoid ACA Penalties
- Individuals can avoid penalties by making sure they’re enrolled in health insurance that meets the minimum essential coverage (MEC) ACA requirements.
- Individuals can also avoid penalties by applying for certain IRS exemptions if they’re unable to get coverage.
- Insurance providers and employers can avoid penalties by providing insurance that meets ACA quality guidelines.
- Employers can avoid penalties by providing MEC to 95% or more of their full-time employees.
- Providers and employers can also avoid penalties by reporting coverage to the IRS correctly and on time either by paper filing or e-filing the required aca forms.
File 1095-C Online with IRS authorized E-file software to avoid ACA Penalty.
ACA Deadlines
Normally, ACA recipient forms need to be mailed out by January 31 each year, but now it is extended to
March 01, 2024.
Paper filers need to file with the IRS by February 28, 2024 and E-filers must e-file 1095-C, 1095-B Forms within April 01, 2024.
Avoid Penalties & Start Filing Now