What's Happening?
The IRS has increased its enforcement of the Affordable Care Act (ACA) requirements for applicable large employers (ALEs), those with more than 50 full-time equivalent employees. ALEs are mandated to offer minimal essential coverage and report these offers through forms 1094-C and 1095-C. Failure to comply can result in penalties, including the employer-shared responsibility payment, which is indexed at $2,970 for 2024. Additionally, ALEs may face penalties for failing to file or furnish required forms, similar to those for forms 1098, 1099, and W-2. The IRS can pursue enforced collection measures such as liens and levies if these penalties are not addressed. ALEs often face challenges in contesting these penalties due to difficulties in obtaining necessary information from the IRS, especially when there has been turnover in management or third-party payroll administrators.
Why It's Important?
The intensified enforcement by the IRS poses significant financial risks for ALEs, potentially impacting their operational budgets and compliance strategies. The penalties for non-compliance can be substantial, affecting the financial health of businesses that fail to meet ACA requirements. This enforcement action underscores the importance for ALEs to maintain accurate records and ensure timely filing of required forms to avoid penalties. The broader impact on the U.S. business landscape includes increased administrative burdens and potential legal challenges, as ALEs may need to engage tax professionals to navigate these complexities. The enforcement also highlights the ongoing role of the ACA in shaping employer responsibilities and healthcare coverage in the U.S.
What's Next?
ALEs are advised to promptly respond to IRS inquiries and assessments to mitigate potential penalties. They should consider retaining proof of filing indefinitely to limit future exposure to information return penalty assessments. The Employer Reporting Improvement Act, enacted in December 2024, sets a six-year limit on assessing employer-shared responsibility payments for forms filed after Dec. 31, 2024, which may lead to future litigation regarding the statute of limitations for forms filed before this date. ALEs may need to work with experienced professionals to challenge assessments and resolve liabilities, potentially reducing the financial impact of IRS claims.
Beyond the Headlines
The IRS's enforcement actions may lead to broader discussions about the effectiveness and fairness of ACA compliance requirements. Legal challenges could arise regarding the interpretation of the statute of limitations for responsibility payments, potentially influencing future legislative or regulatory changes. The situation also raises ethical considerations about the balance between government enforcement and employer rights, particularly in cases where ALEs face difficulties in contesting penalties due to administrative or personnel changes.
