The IRS with the help of the Affordable Care Act and other legislation is gearing up for an Increase in Revenue. More evidence that the Affordable Care Act (ACA) is more about revenue generation than healthcare is becoming evident as different tax based legislation and ACA legislation team up in 2015 and 2016.
In 2015, IRS Sections 6721 and 6722 were amended by the Trade Preferences Extension Act of 2015…just in time for the first year of reporting on ACA related Forms 1094 and 1095 due in 2016 for taxable years beginning in 2015. And on the heels of that, IRS announcement 16-11 increased penalties in 2016 effective for 2015 reporting due in 2016.
Below is a summary of the effects of these amendments as they relate to 2016 tax filings for 2015.
- In 2015, failure to file returns and statements required to be filed after December 31, 2015 increased from $100 to $250/record and maximum penalties increased from $1.5 million to $3 million.
- In 2016 the increase is to $260.00/record and the maximum is $3,178,500
- In 2015, if corrections weren’t filed within 30 days a fine of $30/record increased to $50/record and the maximum penalty was increased from $250,000 to $500,000.
- In 2016, the fine stays at $50/record and the maximum penalty is increased to $529,500.
- In 2015, if corrections were filed before August 1st but after 30 days a fine of $60/record increased to $100/record and the maximum penalty was increased from $500,000 to $1.5 million.
- In 2016, the fine stays at $100/record and the maximum penalty is increased to $1,589,000.
In addition to these staggering increases, it’s important to note that these penalties apply to ALL tax information...from ACA 1094 forms to 1099 forms. The IRS claims that the latest increases are the result of inflation adjustments which regularly occur, however most of the penalties mentioned above had not changed in at least 5 years. I can understand inflation adjustments applying to goods and services…not so much with fines and penalties.
Finally, it seems the IRS does have a bit of a conscience. The IRS addressed corrections and reduced penalties for the ACA reporting due in 2016 in FAQs under the heading of Affordable Care Act Tax Provisions…Questions and Answers on Information Reporting by Health Coverage Providers (Section 6055). In essence the August 1, 2016 deadlines have been extended and the following statement is included in the FAQ.
“In implementing new information reporting requirements, short-term relief from reporting penalties frequently is provided. This relief generally allows additional time to develop appropriate procedures for collection of data and compliance with the new reporting requirements. Accordingly, the IRS will not impose penalties under sections 6721 and 6722 for 2015 returns and statements filed and furnished in 2016 on reporting entities that can show that they have made good faith efforts to comply with the information reporting requirements.”
About the Author, Dwight Seeley, Vice President of Employee Benefits Programs at Sequent
Dwight is a member of the leadership team at Sequent and is responsible for managing the employee benefit programs for Sequent and for our client companies. Prior to that he was a Practice Leader for the Consulting Solutions area of Sequent where he applied Sequent proprietary tools and methods to help organizations improve alignment and increase accountability for better outcomes.