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IRS Releases Its Annual Transition Relief Notice for ACA Reporting But Warns This Could Be the Last Year

October 5, 2020

On October 2, 2020 the IRS issued its seemingly annual transition relief Notice which provides an automatic extension from the deadline to furnish the Forms 1095-B and 1095-C statements to individuals. Additionally, the IRS again extended the good faith efforts standard to the 2020 Forms. Finally, the Notice discusses the conditions that need to be satisfied to not furnish the Form 1095-B to an individual and the extremely limited circumstances under which an employer would not have to provide the Form 1095-C to an individual. The details of the Notice are discussed in the remainder of this article.

Notice 2020-76 provides transition relief by extending the due date for the Form 1095-B and Form 1095-C statements that were to be furnished to individuals by February 1, 2021 (as a result of January 31, 2021 falling on a Sunday) to March 2, 2021. Importantly, the permissive extension discussed in the instructions to the respective Forms no longer applies. Therefore, the March 2, 2021 deadline for furnishing the Form 1095-B and Form 1095-C statements is now a hard deadline. The Notice states the Service will not even respond to employers requesting an extension beyond the March 2, 2021 deadline.

Similar to previous years, Notice 2020-76 does not provide an extension for the Forms 1094-B and 1095-B or Forms 1094-C and1095-C which are to be provided to the IRS. The deadline to file the Forms 1094-B and 1095-B and Forms 1094-C and 1095-C with the IRS is March 1, 2021 (as a result of February 28, 2021 falling on a Sunday) if the employer is filing on paper. If an employer is filing electronically, the deadline is March 31, 2021. An employer can still complete a Form 8809 to receive an automatic 30 day extension.

Notice 2020-76 also extends the good faith efforts standard to the 2020 Forms so long as an employer complies with the new deadline for furnishing the statement to individuals and the deadline for filing the Forms 1094-B and 1095-B and Forms 1094-C and 1095-C with the IRS. The IRS has been issuing penalties under IRC sections 6721 and 6722 so timely filing the Forms is critical so taxpayers who are placed in the precarious position of receiving a proposed penalty can utilize the good faith efforts standard provided by the Notice. The Notice states that this will be the last year of the good faith efforts standard. Consequently, in future years it will be more critical than ever to have a service provider that completes the Forms meticulously.

Finally, Notice 2020-76 provides relief from the penalty under section 6722 for entities required to furnish the Form 1095-B to individuals in certain cases. The IRS will not penalize a reporting entity under section 6722 for failure to furnish a Form 1095-B to an individual if the following two conditions are satisfied:

  1. The reporting entity prominently posts a notice on its website that an individual may receive a copy of their 2020 Form 1095-B upon request. The prominently placed notice must include an email address and a physical address to which the request for the Form 1095-B may be made. Additionally, the notice on the website must include a phone number that individuals can contact with questions.

  2. The reporting entity must provide a Form 1095-B within 30 days to any individual who requests their Form 1095-B.

Unfortunately, a similar transition relief provision was not extended to the Form 1095-C except in an extremely limited circumstance. For self-insured employers who use combined reporting by completing the Form 1095-C Parts I, II, and III the rule is the employer must furnish a Form 1095-C to any full-time employee by the March 2, 2021 deadline. However, if an employer extended coverage to an individual who was not a full-time employee for any month during 2020, an IRC section 6722 penalty will not be assessed against an employer with respect to that individual so long as the two conditions discussed above are satisfied. Given the conditions required to not provide a Form 1095-C to an individual and how few Forms 1095-C are provided to individuals who are not full-time employees for any month during the calendar year, it is probably simplest just to provide a Form 1095-C to every required individual.

Notice 2020-76 extends the due date to furnish the Forms 1095-B and 1095-C to requisite individuals from February 1, 2021 to March 2, 2021 and extended the good faith efforts standard for timely filers. Entities who provide the Form 1095-B to individuals may be able to wait to do so until the individual makes such a request so long as the conditions discussed above are satisfied. However, and importantly, employers will still be responsible for providing the Form 1095-C to requisite employees except for the extremely limited circumstances discussed above. The IRS has been harsher with its penalties as the ACA has aged. Therefore, timely and accurate reporting is always the best approach. Accord Systems takes pride in the fact that not a single client has been penalized for ACA related issues. Should you have any additional questions or need assistance filing the Forms 1094-C and 1095-C or would like to discuss licensing our software, please contact us.

About the author – Ryan Moulder serves as General Counsel at Accord Systems, LLC and is a Partner at Health Care Attorneys P.C. 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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