November 11, 2025
It is hard to believe but the 2025 reporting season will represent the eleventh time employers who have been applicable large employers since the beginning have filed the Forms 1094-C and 1095-C with the IRS. While a reasonable person would expect the glitches in the systems and enforcement to have been cured, errors in reporting and enforcement still proliferate the space. Therefore, before sending off the Forms to the IRS and the requisite employees, a deeper dive into the details of the Forms should always be performed. Our clients have the benefit of automated software that reviews all line 14, 15, and 16 code combinations as well as the code combinations over multiple months to flag potential problems for the client. This has been a successful tool in keeping our clients from receiving unnecessary IRS penalties which sadly still present a prevalent problem for employers who report the Forms inaccurately to the IRS. The following article explores five items for employers to consider before reporting the Forms 1094-C and 1095-C to the IRS and the requisite employees for the 2025 reporting season.
Don’t Have an Own Goal or Even Worse Two Own Goals
There is nothing worse than needlessly making an error that will cause significant pain and stress in the future. In private practice over the last decade I have repeatedly seen two errors that have created huge problems for clients. The first error involves miscommunication between employers and payroll providers regarding whether the Forms are being submitted. I have repeatedly represented clients in private practice who were under the impression their payroll provider (who were almost always some of the biggest players in the payroll space generating billions of dollars in yearly revenue) were filing on their behalf. Unfortunately, the Forms never get filed and the employer then gets a large penalty for not filing the Forms with the IRS and an equally large penalty for not furnishing the Forms 1095-C to the requisite employees. This error can be avoided by asking the service provider to send the receipt ID when the Forms are submitted to the IRS.
The receipt ID is a collection of letters and numbers a service provider (or an employer if the employer is self-reporting) receives when the service provider submits the Forms 1094-C and 1095-C to the IRS on behalf of an employer. This will give an employer confidence the Forms have been filed with the IRS and evidence as to the timeliness of the filing should there be issues with the filing in the future. Every employer needs to ask its ACA service provider for the receipt ID in 2025.
The second own goal error I have seen repeatedly in private practice is an error on line 23 of the Form 1094-C. Assuming the employer offered minimum essential coverage to at least 95% of its full-time employees and their dependents for the entire calendar year, which is a goal for almost all employers, check the “Yes” box on line 23. This is such a simple thing to do but I have repeatedly seen employers leaving this line blank or for whatever reason checking the “No” box which then leads to an astronomical penalty being assessed under IRC section 4980H(a). By checking the “Yes” box, an employer will move any penalty that is assessed to the less severe IRC section 4980H(b) penalty.
Alternative Manner of Furnishing the Forms 1095-C to Employees
For the second year, although last year the waters were murky and the announcement did not occur until December, an alternative method is available to meet the requirement to furnish the Forms 1095-C to the requisite employees. Employers now have the option to post a notice on their website informing individuals that they can request a copy of the Form 1095-C. To meet the requirements of this alternative, the notice must: (1) Be clear, conspicuous, and reasonably accessible to everyone who is having a Form 1095-C generated on their behalf; (2) Be posted by March 2, 2026 and retained until October 15, 2026; and (3) Be clear that the Form 1095-C will be furnished to the individual no later than 30 days after the date of the request.
We would caution anyone who has State filing obligations in pursuing this method as the States have been slow to mirror this reporting standard. However, this could be a way to relieve some of the reporting burdens placed on employers by the Affordable Care Act and save a lot of paper.
Updated Numbers for Affordability
As explained thoroughly in our previous affordability publication, a plan is considered affordable under the ACA if the employee’s contribution level for self-only coverage does not exceed 9.5 percent of the employee’s household income. This 9.5 percent threshold is indexed for years after 2014. In 2026 the affordability threshold will rise to 9.96 percent. This is a significant increase from the 2025 affordability threshold of 9.02 percent.
Updated IRS Penalty Numbers
The penalty amounts under section 4980H(a) and (b) continue to increase compared to previous years. The Code explains that the original $2,000 amount associated with the section 4980H(a) penalty and the original $3,000 amount associated with the section 4980H(b) penalty would be adjusted for calendar years beginning after 2014 (see IRC section 4980H(c)(5)). The Code tells us that the original dollar amount of each penalty is multiplied by the premium adjustment percentage (PAP) which is defined in a separate section of the ACA (see PPACA section 1302(c)(4)). Furthermore, the Code instructs that the product of those numbers is rounded down to the next lowest multiple of $10 (if the number is not a multiple of $10). The equation is simple once the PAP is known.
In 2025 the PAP is 1.6726771219. Multiplying the PAP by $2,000 produces the number $3,345.35. After applying the rounding rule, the section 4980H(a) penalty in 2025 will be $3,340 annually which equates to $278.33 per month. Multiplying the PAP by $3,000 produces the number $5,018.03. In 2025 the section 4980H(b) penalty will be $5,010 annually which equates to $417.50 per month. These penalties have always been prohibitively expensive and that continues to be truer each year as the penalties continue to increase rapidly.
Conclusion
Employers should closely review the Forms 1094-C and 1095-C before submitting the Forms to the IRS. Critically, all employers should collect a receipt ID from their service provider and make sure the “Yes” box is checked on line 23 of the Form 1094-C assuming the employer offered minimum essential coverage to at least 95% of its full-time employees and their dependents. The codes entered on lines 14, 15, and 16 should also be verified for accuracy. We have an automated tool that can do this for employers! If you are interested in learning about our tool to ensure accurate Forms are submitted to the IRS or you need assistance filing the Forms 1094-C and 1095-C, please don’t hesitate to contact us.
About the author – Ryan Moulder serves as General Counsel at Accord Systems, LLC. Ryan received his LL.M. from Georgetown University Law Center and his J.D. from Saint Louis University School of Law. He has distinguished himself as a leader in the Affordable Care Act arena and has written and spoken on a variety of ACA topics as it relates to compliance for companies.
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