It’s tax season: your favorite time of year for filling out a million forms, staring at your computer for hours, and maybe pulling out your hair just a bit. But, reporting doesn’t have to end in partial balding. Sure, the Affordable Care Act kicking in means an even more complicated instruction manual for this year’s taxes, and the IRS says that the 1094-C form alone will take four hours to complete. With each 1095-C form taking 12 minutes as well, just having 100 employees means you’ll spend 25 hours completing forms. But, we’re here to help. With our guide to forms 1094 and 1095-C, you’ll be the most relaxed, compliant employer on the block—with a full head of hair to prove it.
What’s the Point?
The ACA’s new forms aren’t just requirements meant to make your tax season stressful. They allow the IRS to keep a closer eye on what coverage employers are offering to their employees—specifically, that they are providing the minimum essential coverage as the ACA requires. The 1095-C form relays to the IRS information about the health care plans offered to each employee, where the 1094-C form simply acts as a cover letter when transporting the 1095-C forms—you only send one. The 1094-C provides basic employer information and the number of 1095-C forms.
In addition to determining instances of improper coverage, the 1095-C form determines whether an employee qualifies for the premium tax credit. The credit offers assistance in purchasing health insurance from the Health Insurance Marketplace, the government or state-regulated market where those without health insurance can purchase private healthcare. An employee can receive the tax credit if he or she is not provided minimum essential coverage, which is specified on form 1095-C.
Who Needs a Form?
If during 2014 you employed 50 or more people full-time—including full-time equivalent employees whose hours add up to a full-time worker—you’re an Applicable Large Employer. Anytime you see ALE in an Affordable Care Act document, they’re talking about you. And that means you do have to file forms 1094-C and 1095-C. However, as transition relief for 2015, employers can choose to look at any consecutive six-month period of 2014 for their employee count.
Furthermore, employers with less than 50 employees who provided employer-sponsored self-insured health coverage need to file forms 1094-B and 1095-B. These are the same as forms 1094-C and 1095-C, but they are for smaller employers who follow different compliance policies. Since it is not common for employers with less than 50 employees to provide that kind of health coverage, we are only covering the C forms here. But, a guide for B forms can be found on the IRS website here.
Where Do They Go?
The 1095-C forms are filed with the IRS—along with the 1094-C cover form. That’s one bundle of 1095-C forms—one form for each employee—for one 1094-C form. In addition to sending the IRS a 1095-C form for each employee, employers must furnish every employee with a written statement reporting the same personal health insurance information that the employer reports to the IRS. It’s easiest if the written statement is a copy of the employee’s 1095-C, but it doesn’t have to be. Whatever form you do choose, it must be one of the IRS’s acceptable substitute statements.
Now, here is your chance to have some agency: The employer can decide to file the forms electronically or by mail. That is, unless you send 250 or more returns. In that case, filing electronically is required. If you have more than 250 employees, it's time to bust open that laptop.
What You’ll Need
You’ll only need to send the IRS one 1094-C Form—called the Authoritative Transmittal—but the IRS gets one 1095-C form for each employee. That means reporting on all employees, full and part-time, who enrolled in provided coverage. But, you only need these forms if you provided a self-insured plan.
The 1094-C form relays the employer’s name, employer EIN (if you don’t have one, you can apply online), employer address, name and phone number of the person responsible for answering questions, and total number of forms 1095-C submitted with that form.
Section II is the more complicated part of form 1094-C—specifically line 22. And, it’s the most beneficial section to get right. This line designates whether or not an employer can, and chooses to, use an offer method or transition relief. You can check one of four boxes:
A. Qualifying Offer Method
B. Qualifying Offer Method Transition Relief
C. Section 4980H Transition Relief
D. 98% Offer Method
Choose A, Qualifying Offer Method, if you made a qualifying offer—aka offering minimal essential coverage—to one or more full-time employees for the entire year they worked full-time for you.
Check B, Qualifying Offer Method Transition Relief, if you are using the form to report two employees. By the way, you can only do this if you made a qualifying offer to at least 95% of your full-time employees. Checking B means a slight change to the process of completing the form, so instructions can be found on the IRS website under "Specific Instructions for Form 1094-C."
Box C is only checked if you qualify for section 4980H transition relief under one of these two categories:
- An employer with 50 to 99 employees
- An employer who offers coverage to at least 70% of its workforce
Lastly, check box D if you offered affordable health coverage providing minimum value to at least 98% of the employees you fill out a 1095-C form for.
The 1095-C form is all about the employee—remember, submit one for each employee. It includes the employee’s name, social security number, address, as well as the employer’s information. Part II lays out the coverage that the employee received for the year. There are different codes that correspond to different types of coverage and they can be found on the IRS website here.
Part III of the form will only be filled out if the employer offered a self-insured major medical plan and a health reimbursement arrangement. If you didn’t, go ahead and skip it.
Keep an Eye on Dates
If you’re mailing forms to the IRS, both must be post-marked by May 31, 2016. However, if filing electronically, the deadline is June 30, 2016. And when it comes to delivering form 1095-C to employees, the cut-off date is March 31, 2016.
Remember: after this year, the dates will change. From 2017 on, forms mailed to the IRS must be post-marked by February 28 and electronic files are due March 31. The 1095-C forms must reach employees by January 31.
If you are running late, it is possible to get an extension. For an easy 30-day extension, no signature or explanation necessary, fill out form 8809 and file it by the due date of the returns. But, watch out for that due date, because if it passes and an extension request hasn’t been filed, you’ll be held responsible for missing the deadline. And if these forms aren’t filed on time, there are strict penalties.
For every form 1095-C or 1094-C that is not filed, the employer receives a $250 fine—up to $3,000,000. Failure to provide a correct payee statement has the same fines for each missing form.
The good news? For 2016, the IRS will not enforce penalties for reporting incorrect or incomplete information as long as an employer can prove they made good faith efforts to follow the 2015 reporting requirements.
There are some stiff penalties for messing up these forms. So, it’s best to collaborate with an HR solution provider to help you stay compliant, especially one that can generate the 1094-C and 1095-Cs and auto-populate your HR data. But, even though your provider will be there to help you with your reporting, it always pays to know the big do’s and don’ts yourself. It’s like double-checking your work—on the biggest test of the year.
What If a Form Has a Mistake?
Did you send in a form with a mistake? Don’t worry: There’s no need to freak out. You have the chance to file a correction form for 1094-or 1095-C forms. Better yet? It’s simple.
For filing corrections to a 1094-C form, send the corrected form by itself. Nothing else can go with this form. On the correct form, mark the CORRECTED box with an “X.” For specific cases and how to deal with them, consult the chart on the IRS site.
A corrected 1095-C form must be sent with a 1094-C Transmittal form. But, only check the CORRECTED box on the 1095-C form, not 1094-C. A copy of the corrected 1095-C form must also be furnished to the employee. The exception: If the employer can use the Qualifying Offer Method or the Qualifying Offer Method Transition Relief for 2015. Again, refer to the IRS charts for specific mistakes and how to take action.
The final step: Take a deep breath. These forms aren’t as scary as the paperwork makes them seem. With the proper planning and an HR provider who’s got your back, you’ll be sure to steer clear of those costly penalties. And just think, you might be only 25 hours away from having ACA compliance squared aware for the year. With a great HR tech solution in place, you can trim down those hours significantly. Don’t lose a full day to the ACA—spend a few of those hours getting a new hairdo instead. You’ve earned it.