If you are like many employers, you may have realized you were in over your head with these new reporting requirements or just didn’t have the time to get up to speed or prepare the forms and, therefore, you likely hired a third-party vendor to assist you in meeting these new obligations. Great first step on your part! However, employers are not relieved of liability if they submit an incorrect Form 1094 or 1095 to the IRS even if a vendor prepared and submitted the forms on the employers behalf.
These new reporting rules are complicated. Even the best vendors can make mistakes due to the complexity of the rules and a lack of guidance in so many areas (e.g., how we report mid-year retirees). We have assisted many clients with questions as they have spot checked the forms or files provided by their reporting vendors. More often than not, we are finding errors. The good news is that even if you have errors on your Form 1094 and/or Forms 1095, as long as you have made a “good faith” attempt at compliance with the new reporting rules, the IRS has stated they won’t penalize employers for incorrect information provided on the 2015 Forms. The fact that you hired a reporting vendor should go a long way in showing good faith compliance, but reviewing and correcting any errors you find shows an even better good faith attempt. Further, it may save you time in the long run.
A lot of the errors we are finding are improper coding on line 16 of the Form 1095-C. Line 16 is the magic line that tells the IRS whether or not it should issue a pay or play penalty on you for not providing affordable coverage to a full-time employee. If you use the wrong code on this form, the IRS may very well issue a pay or play penalty on your company. While you will have the opportunity to appeal penalties that shouldn’t have been issued due to providing affordable coverage to your employees, most employers would prefer not to have to hassle with that step. One way to avoid a large number of appeals is to review your Forms 1095 before they are submitted to the IRS.