The Internal Revenue Service (“IRS”) has extended the deadline for 2016 Information Reporting by employers (and other entities) to individuals under Internal Revenue Code sections 6055 and 6056 by just over one month. However, the deadline for these entities to file with the Internal Revenue Service (IRS) remains the same.
IRS Notice 2016-70 extends the due dates for the following 2016 information reporting Forms from January 31, 2017 to March 2, 2017:
- 2016 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage
- 2016 Form 1095-B, Health Coverage
However, the due dates for filing these Forms and their Transmittals with the IRS remains unchanged. Specifically, the due date for filing the following documents with the IRS is February 28, 2017; however, if filing electronically, the due date is March 31, 2017 (employers who are required to file 250 or more Forms must file electronically):
- 2016 Form 1094-B, Transmittal of Health Coverage Information Returns, and the 2016 Form 1095-B, Health Coverage
- 2016 Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and the 2016 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage
As a result of these extensions, individuals might not receive a Form 1095-B or Form 1095-C by the time they file their 2016 tax returns. In such case, IRS Notice 2016-70 explains that individual taxpayers may instead rely on other information received from their employers or other coverage providers for purposes of filing their tax returns and do not need to wait to receive Forms 1095-B and 1095-C before filing. Once they do receive their forms, the individuals should keep it with their tax records. You can find the full Notice here.
Please note that no further extension beyond the March 2, 2017 deadline is allowed. Therefore, this deadline for furnishing the Forms to individuals must be met. However, additional extensions may still be available for filing these Forms with the IRS.
Background
As provided in previous Client Alerts, information reporting requirements are applicable under two Internal Revenue Code (“Code”) sections as follows:
- Section 6055 for insurers, self-insuring employers, and certain other providers of minimum essential coverage; and
- Section 6056 for applicable large employers.
By way of background, the IRS requires applicable large employers and sponsors of self-insured health plans to report on the health coverage offered and/or provided to individuals beginning calendar year 2015. Although the reporting requirements extend to other entities that provide “minimum essential coverage” (such as health insurance issuers), this Client Alert focuses on the requirements imposed on employers.
Employers who are deemed applicable large employers, as well as employers of any size who offer self-funded health coverage, must carefully review and study these instructions, which set forth numerous details, definitions and indicator codes which must be used to complete the requisite forms. The instructions address the “when, where and how” to file, extensions and waivers that may be available, how to file corrected returns, and potential relief from penalties imposed for incorrect or incomplete filing.
The IRS utilizes information from these returns to determine which individuals were offered minimum essential coverage, whether individuals were eligible for premium tax credits in the Marketplace, as well as to determine penalties to be imposed on employers under Pay or Play (Code section 4890H; Shared Responsibility for Employers Regarding Health Coverage, 26 CFR Parts 1, 54, and 301, 79 Fed. Reg. 8543 (Feb. 12, 2014)). Due to the impact of proper reporting, a clear understanding of these forms and instructions is essential.
Code section 6056 applies to applicable large employers (generally employers with at least 50 full-time employees, including full-time equivalent employees). Information with respect to each full-time employee (whether or not offered coverage) must be reported on Form 1095-C. Transmittal Form 1094-C must accompany the Forms 1095-C; all the Forms 1095-C together with the Transmittal Form 1094-C constitute the Code section 6056 information return that is required to be filed with the IRS. For applicable large employers who self-insure, there is a separate box to complete which incorporates the information required under Code section 6055.
Code section 6055 applies to employers of any size who self-insure. Non-applicable large employers with self-funded plans must report their information on Form 1095-B, as well as on transmittal Form 1094-B. All of the Forms 1095-B together with the Transmittal Form 1094-B constitute the Code section 6055 information return that is required to be filed with the IRS. Again, if the employer who self-insures is also an applicable large employer, the employer will instead use Forms 1095-C and 1094-C, which include a section for self-insured plans.
Employers subject to these requirements must report in early 2017 for the entire 2016 calendar year.
Additionally, employers must provide informational statements to the individuals for whom they are reporting. Form 1095-C or Form 1095-B (as applicable) may be used as this informational statement.
The links to the Final Forms and Instructions are below:
2016 Forms for Applicable Large Employers (Code Section 6056)
2016 Instructions for Forms 1094-C and 1095-C: click here.
Form 1095-C, Employer Provided Health Insurance Offer and Coverage: click here.
Form 1094-C, Transmittal of Employer Provided Health Insurance Offer and Coverage Information Returns: click here.
Additionally, the IRS has posted numerous Questions and Answers regarding Code section 6056 on its website, here.
2016 Forms for Employers who Self-Fund (Code Section 6055)
2016 Instructions for Forms 1094-B and 1095-B
Form 1095-B, Health Coverage
Form 1094-B, Transmittal of Health Coverage Information Returns
The IRS’ Questions and Answers regarding Code section 6055 can be found here.
Change in Forms for 2016
The changes to the 2016 forms are reflected in the above Instructions but are relatively minor in scope. The most noteworthy changes are to Form 1094-C with the removal of the Line 22 box for “Qualifying Offer Method Transition Relief” as it was only applicable for 2015; as well as two new Line 14 codes (1J and 1K) added to Form 1095-C which are available to reflect conditional offers of coverage to an employee’s spouse. As explained in the instructions, a conditional offer of coverage to a spouse is “an offer of coverage that is subject to one or more reasonable, objective conditions (for example, an offer to cover an employee’s spouse only if the spouse is not eligible for coverage under Medicare or a group health plan sponsored by another employer).” See 2016 Instructions for Forms 1094-C and 1095-C.
Penalties Imposed
Both sets of Instructions (for Forms 1094/1095-B and Forms 1094/1095-C) set forth the following penalty information for failure to comply with the information reporting requirements for 2016:
The penalty for failure to file a correct information return is $260 for each return for which the failure occurs, with the total penalty for a calendar year not to exceed $3,193,000.
The penalty for failure to provide a correct payee statement is $260 for each statement for which the failure occurs, with the total penalty for a calendar year not to exceed $3,193,000.
Special rules apply that increase the per-statement and total penalties if there is intentional disregard of the requirement to file the returns and furnish the required statements.
However, the IRS has continued the good faith transition relief from penalties for 2016. Indeed, IRS Notice 2017-70 states:
Specifically, this notice extends transition relief from penalties under sections 6721 and 6722 to reporting entities that can show that they have made good-faith efforts to comply with the information-reporting requirements under sections 6055 and 6056 for 2016 (both for furnishing to individuals and for filing with the Service) for incorrect or incomplete information reported on the return or statement. This relief applies to missing and inaccurate taxpayer identification numbers and dates of birth, as well as other information required on the return or statement. No relief is provided in the case of reporting entities that do not make a good-faith effort to comply with the regulations or that fail to file an information return or furnish a statement by the due dates (as extended under the rules described above).
Thus, it is imperative to timely distribute and file the forms; otherwise penalties may ensue.
This correspondence is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.
Elizabeth H. Latchana specializes in employee health and welfare benefits. Recognized for her outstanding legal work, she was selected as the 2015 “Lawyer of the Year” in Lansing for Employee Benefits (ERISA) Law by Best Lawyers. Contact her for more information on this reminder or other matters at 517.377.0826 or elatchana@fraserlawfirm.com.
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