IRS Meets With ACA Stakeholders
By Alice P. Jacobsohn, Esq.
In preparation for a September 21 meeting on the Affordable Care Act (ACA) with IRS Commissioner John Koskinen and other IRS employees, the APA Government Relations Task Force Subcommittee on IRS Issues was asked to offer feedback on the ACA's impact on payroll activities. The IRS specifically asked APA members the following two questions:
- What resources are most helpful as you prepare to file information returns?
- What recommendations and lessons learned do you have to improve the ACA information reporting process?
The overwhelming response was that ACA information reporting remains extremely complicated and difficult to manage. One member said, "I would need an entirely new team—one that consists of more than myself as the team. I have absolutely no idea what we did nor do I believe what we did manage to get out the door was accurate. This was the worst information filing season!"
With that, a few APA members and staff headed to IRS headquarters in Washington, D.C.End of Filing Extensions
In Commissioner Koskinen's opening remarks, he stated identity theft claims at the IRS decreased by 50% in 2016. He added the agency's goal is to standardize its organizational infrastructure to focus attention where taxpayers need support the most. The agency is not looking to collect penalties, but to ensure full compliance with tax return filing and information report submissions. In particular, added protocols are necessary for authentication to ensure those people who communicate with the IRS are who they claim to be.
Commissioner Koskinen—and later IRS staff—emphasized the agency has no plans to extend the deadlines for ACA reporting as it did for the 2015 information reports. The deadlines for ACA reporting were set by Congress in the law itself. As the agency responsible for implementing reporting requirements, the IRS allowed a blanket extension of time for all applicable employers in the first year. However, the IRS believes offering another employer-wide extension is the equivalent of unilaterally changing the law or re-legislating, and the agency does not have that authority.
The ability of an employer to request an extension remains in place. An automatic 30-day extension is allowed for Forms 1094-C and the 1095 series. It must be requested on Form 8809, Application for Extension of Time to File Information Returns. A second extension can also be requested on Form 8809, but it requires a detailed explanation of why an employer requires an extension. The form can be completed online for an automatic extension at https://fire.irs.gov. Requests for an additional extension of time must be submitted on paper Form 8809.More Guidance Recommended
In addition, APA said the webinars about ACA information reporting were useful and recommended additional guidance. Considerable confusion remains with identifying the correct codes to use on the forms, specifically for Form 1095-C boxes 14 through 16. APA asked the IRS to issue clear and concise guidance on the codes.
In addition, APA recommended guidance on addressing filing for employers in mergers and acquisitions, company splits, and changes to controlled groups. Employers need to know how to identify the employee offer of coverage in these situations. Some examples are listed below.
Other ACA Issues
- Does the merged company collect the data from the two previously separate companies and then add the information from the merged company's healthcare coverage?
- Should reporting include just the data based on the start date of coverage by the merged company?
- Are three different information filings required for each of the three entities in a merger??
- In an acquisition, are two different information returns required for employees of the acquired company?
- When a company splits, are separate information reports required from the original company and then each of the newly formed entities?
In further discussions, the IRS stated that reporting is required in situations in which an employer provides a payment to an employee who opts out of employer health care coverage. This is still part of the offer of coverage requirements.
APA's request for more detailed information on error reports was granted. When filing 2016 forms, error messages will identify the problem. For example, the message will state an employee's social security number (SSN) does not match and tell the user which employee has the error. In addition, error messages will not automatically generate a penalty notice. The IRS would rather allow an employer to fix errors within a reasonable time.
Specifically, the IRS described how new error messages will appear in the ACA Information Returns (AIR) program. Error messages are found in an error data file (XPath). For example, if five covered individuals are in a payload and the third one shows an incorrect SSN, the XPath will indicate the third instance is incorrect. Transmitters must update their software to read the XPath file. The error codes and error text were replaced by business rule codes and full business rule text that includes the XPath.
Additional ACA meetings are not scheduled, but the IRS plans to continue discussions with stakeholders. APA continues to engage with the IRS and will keep members informed. Alice P. Jacobsohn, Esq., is Senior Manager of Government Relations for the APA.