With the June 30, 2016 deadline behind us many employers think their obligations associated with Form 1095-C are complete. Unfortunately, this is not the case. An employer is responsible for filing a corrected Form 1095-C if there was an error in the name, the taxpayer identification number (TIN), the employer EIN, line 14, 15, or 16, or Part III related to covered individuals. The source of the error identification may be an IRS error message when submitting the Form 1095-C, the employer recognizing the error through an internal process, or the employee after receiving the Form 1095-C. Regardless of the source of the identification of the error, the employer must take the following steps to correct the Form 1095-C. First, the employer should prepare a new Form 1095-C for the employee and check the “CORRECTED” box on the top right hand corner of the Form 1095-C. Next, the employer should complete a non-authoritative Form 1094-C to submit with the corrected Form 1095-C. An employer should not check the “CORRECTED” box on the top right corner of the Form 1094-C. Finally, the employer should furnish a corrected Form 1095-C to the employee.
One area a lot of employers are repeatedly failing is accurately completing lines 14, 15, and 16 of the Form 1095-C. The challenge is presented by the 200 possible combinations for line 14, 15, and 16. There are ten possible entries for line 14 (1A, 1B, 1C, 1D, 1E, 1F, 1G, 1H, 1I, and Leave Blank), two possible entries for line 15 (Complete or Leave Blank), and ten possible entries for line 16 (2A, 2B, 2C, 2D, 2E, 2F, 2G, 2H, 2I, and Leave Blank).
Some of the options in the paragraph above are clearly always incorrect. For example, a code must be entered on line 14 for each calendar month, even if the employee was not a full-time employee for one or more of the calendar months. Therefore, the “Leave Blank” option for any month on line 14 is really not an option at all. Furthermore, the Form 1095-C instructions make it clear that line 15 should only be completed if 1B, 1C, 1D, or 1E is entered on line 14. Taking the inverse of that statement line 15 should not be completed if 1A, 1F, 1G, 1H, or 1I is entered on line 14. Applying these two rules eliminates 110 of the 200 possible combinations for line 14, 15 and 16. Of the remaining 90 possible outcomes only 49 are true outcomes and some of these 49 are only theoretically possible and could only be expected to be seen in the most bizarre circumstances.
Unfortunately, the rules whittling down the remaining 90 options are not as simple as the two rules that eliminated 110 of the options discussed above. Instead, a careful reading of the instructions, some abstract thought (and sometimes even some assumptions) must be made to produce the list of the 49 true outcomes.
Many software providers and employers have failed to realize that the codes they have submitted to the IRS on lines 14, 15, and 16 of the Form 1095-C are impossible. The Form 1094-C and Form 1095-C tell the IRS a story which will help determine if the employer owes a penalty under section 4980H but also whether the employees of the employer are eligible for premium tax credits. Entering incorrect code combinations will present a false narrative to the IRS which could impact the employer being assessed a section 4980H penalty but also may make an employee ineligible for a premium tax credit. This is why the code combinations are so important. If lines 14, 15, or 16 are completed incorrectly, the government will have no way to accurately determine which employers owe a section 4980H penalty or who is eligible for a premium tax credit.
To assist employers with this complex issue Accord created Form Patrol which does not allow an employer to submit a Form 1095-C with impossible code combinations. We believe accurate line 14, 15, and 16 codes combinations is an obligation an employer has in order to fulfill its good faith efforts standard for the 2015 calendar year. If you would like to submit a sample of the data you submitted to the IRS in 2015 to check its accuracy, you can create a file to run through Form Patrol by clicking on the following link https://www.accord-aca.com/formpatrol
If you would like an in-depth analysis, give us a call at 888-727-2221 or email firstname.lastname@example.org