2016 brings new Affordable Care Act reporting requirements for small businesses
The vast majority of information necessary to properly comply with the new reporting requirements is found in 26 CFR 1.6055-1 Information Reporting For Minimum Essential Coverage.
For those of you who would rather focus on your businesses here are the basic essentials for what you are required to provide.
Every person who provides minimum essential coverage to an individual during a calendar year must file an information return and transmittal and furnish statements to responsible individuals on forms prescribed by the Internal Revenue Service.
Minimum Essential Coverage
There are quite literally volumes of information on what is minimum essential coverage. Then a wise colleague of mine simply stated that if you purchased health care coverage recently, it meets those qualifications or else they couldn’t sell the policy. The brilliance of that statement and a quick call to your insurance provider should provide you with all the assurances that your policy meets minimum standards.
When Do I Need To Report
Jan. 31 – Each employer furnishes a statement of minimum essential coverage for each covered individual
Feb. 28 – Providers of minimum essential coverage must file forms 1095-B and 1094-B.
Mar. 31 – You may extend the February reporting date to Mar. 31, if you file forms 1095-B and 1094-B electronically.
Jan. 31 — Statement
The easiest way to comply with this reporting requirement is to send a copy of form 1095-B to each “Responsible Individual.”
A ‘responsible individual’ is defined as the primary insured, employee, former employee, uniformed services sponsor, parent, or other related persona named on the application who enrolls one or more individuals, including him or herself, in minimum essential coverage.
Think of providing a 1095-B like providing each of your employees with a W-2 form at the end of every calendar year. You have to create the form per employee anyway, and therefore, this is the easiest way to comply with reporting requirement to employees.
You are not required to provide a copy of form 1095-B to each employee. An alternate statement may be provided that includes only a portion of information provided on form 1095-B: Name of responsible individual (the primary insured individual or the parent or spouse who submitted the application for coverage); name of the coverage provider and essential contact information for that provider.
You do not need to provide a statement to every covered individual. You only need to provide information to those responsible individuals. This does create a potential problem should the responsible person not divulge the proper information to a covered individual for their personal tax filings.
The responsible person must receive either the 1095-B or alternate statement by mail unless the recipient consents to receive the statement in an electronic format. A recipient may consent on paper or electronically. If consent is on paper, the recipient must confirm the consent electronically.
As previously stated, you may wait until Mar. 31 to provide the necessary filings if done so electronically.
Despite your chosen reporting date, forms 1095-B and form 1094-B must be provided annually. Form 1095-B is broken into four parts with appropriate instructions:
Part I: Responsible Person
This section is simply the information of your employee or main insured individual. There are a couple little quirks in this section. Line 3 allows for a social security number, tax identification number, or date of birth. Line eight asks for the identifying origin of the policy. The options are as follows: Small Business Health Options Program; Employer-Sponsored coverage; Government –Sponsored program; Individual market insurance; Multi-employer plan; Other designated minimum essential coverage.
When in doubt, contact your health insurance provided regarding your appropriate origin of policy code.
Part II: Employer-Sponsored Coverage
Your insurance company will provide you with this information if you have employer-sponsored health coverage.
Part III: Issuer or Other Coverage Provider
If you do not have employer-sponsored coverage, then your health insurance provider information is provided in this part. It applies to self-insured coverage Medicaid, Medicare or other government sponsored coverage.
Part IV: Covered Individuals
This gives the IRS the name, SSN, Date of Birth and coverage information for each covered individual. Note that if an individual is not covered for the entire year, you must report every month in which the individual was covered for at least one (1) day. This is used for IRS penalty assessment if necessary.
Businesses with fewer than 50 full-time equivalent employees are exempt from penalties. You do not have to offer health care coverage.
However, if you do have health insurance the penalties for failure to properly file returns are under section 6721 and 6722 of the Internal Revenue Code.
The penalty for failure to file after Dec. 31, 2015, has increased from $100 to $250 for each return not filed. The total penalty imposed cannot exceed $3 million.
The penalty for failure to provide a correct payee statement has increased from $100 to $250. The total penalty imposed cannot exceed $3 million.
A number of my clients have expressed great concern over the “correct payee statement.” They are worried about the false information provided by employees that will result in a penalty to the business. While technically accurate proper documentation of information provided should either stop the penalty assessment or give you a “reasonable cause” argument to abate the penalty. I say should because the IRS isn’t known for their compassionate interpretation. However, in this case, there is every indication that a good faith effort to comply will go a long way towards protecting you and your business.
If you cannot meet the IRS reporting date of Feb. 28 or Mar. 31, if filing electronically, then form 8809 will get you a 30-day extension. You may apply for this extension two times. Make sure you are aware the IRS may deny your extension.
This will take a couple of years to get all the bugs out of the system. My best advice is to seek professional counsel for your first year of reporting.
[panel title=”About Chris Neal” style=”info”]
Chris Neal, owner of Columbia Consulting, has practiced tax law for the last 13 years in the Tri-Cities area. Columbia Consulting is a business and tax consulting firm. Neal is a graduate of Gonzaga Law School and has a Masters of Tax Law from the University of Washington. IRS Controversy and Taxation makes up 90 percent of Columbia Consulting’s current business and clients. Columbia Consulting is at 7025 W Grandridge Blvd. Ste. B-2 in Kennewick. Reach Neal at 509-783-2137.