IRS Confirms ACA Information Returns May Continue to be Electronically Filed without Penalty

The IRS has confirmed that ACA information return filers that failed to meet the June 30, 2016 deadline for electronically submitting Forms 1094-C (and related Forms 1095-C) via the IRS's ACA Information Return system ("AIR system") will not be penalized for filing late as long as they made "legitimate efforts" to register with the system and file the forms. 

Background.  The Affordable Care Act ("ACA") requires Applicable Large Employers ("ALEs"), self-insured employers and other health coverage providers to file information returns with the IRS to report individuals' health insurance coverage.  The ACA information returns include:

  • Form 1094-B, Transmittal of Health Coverage  Information Returns
  • Form 1095-B, Health Coverage
  • Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns
  • Form 1095-C, Employer-Provided Health Insurance Offer and Coverage

While the IRS encourages all filers to electronically submit ACA information returns, entities that are required to file 250 or more information returns are required to file them electronically. The IRS previously established June 30, 2016 as the deadline for entities to electronically submit ACA information returns.  (Note: The deadline for filing paper ACA information returns was May 31, 2016.)

IRS relief.  The IRS has announced that a reporting entity that missed the June 30, 2016 filing deadline will generally not be assessed late filing penalties if it: (i) made "legitimate efforts" to register with the AIR system and file its ACA information returns, and (ii) continues to make such efforts and completes the process as soon as possible.  Accordingly, the IRS confirmed that it will leave the ACA Information Returns system "up and running" beyond June 30, 2016, to allow entities to: (i) complete required system testing; and (ii) continue to electronically file ACA information returns.  Furthermore, the IRS notes that under its information reporting rules, filers that are assessed penalties may still meet the criteria for a reasonable cause waiver of the penalties.

The IRS has also confirmed that filers whose ACA information return transmissions and submissions have been rejected by the AIR system will have 60 days from the date of rejection to submit a replacement without incurring late penalties. In addition, filers that received an "Accepted with Errors" message may continue to submit corrections after June 30, 2016 without penalties, as long as the corrections are timely made.

Takeaway for Employers.  Employers that failed to electronically submit their required ACA information returns to the IRS by June 30, 2016 are advised to continue to work to file their returns as soon as possible.  While the ability to electronically file ACA information returns using the IRS's AIR system remains viable beyond the deadline, employers will only avoid penalties if they continue to make legitimate efforts to complete the process in a timely manner.

The IRS announcement is accessible at: https://www.irs.gov/for-tax-pros/software-developers/information-returns/affordable-care-act-information-return-air-program