IRS Assessing Employer Penalties Under the Affordable Care Act


    Regardless of the litigation of the constitutionality of the Affordable Care Act (ACA) currently taking place at the judicial level, employers subject to the group health insurance “shared responsibility” and information reporting requirements of the ACA continue to face IRS-imposed penalties for failure to comply with these requirements.

    In general

    IRC Section 4980H provides for penalties for large employers (generally, more than 50 employees) that fail to provide “minimum essential” health coverage to their employees, or which do but whose employee(s) qualify for and claim a “premium tax credit” to obtain their own health insurance on an exchange because the coverage is not “affordable” or does not provide “minimum value.” IRC Sections 6721 (Information Returns) and 6722 (Payee Statements) impose penalties on employers that fail to comply with certain information reporting requirements, including the IRC Section 6056 requirement for an employer subject to the ACA to file Form 1095-C (Employer-Provided Health Insurance Offer and Coverage) with the IRS and provide it to their employees. Some employers may be under the impression that the current questions surrounding the constitutionality of the ACA and the current reduction of the individual mandate penalty to 0% has had a chilling effect on the assessment of these penalties by the IRS.

    What does CohnReznick think?

    Large employers should not misinterpret the existing constitutional issues being litigated in the courts as meaning the IRS will not assess the above ACA employer penalties, as it has been doing so for 2015 and 2016. Further, employers should not confuse the reduction under the Tax Cuts and Jobs Act of the penalty on individuals who violate the ACA’s “individual mandate” to 0% with an elimination of any of the ACA’s employer shared responsibility or information reporting requirements, as there has been no such elimination to date.


    Dana Fried, Managing Director, National Tax Services

    Subject matter expertise

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      Dana Fried

      JD, LLM, Managing Director - National Tax Services

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    Tax Reform: The Tax Cuts and Jobs Act – What you need to know, now

    Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice specific to, among other things, your individual facts, circumstances and jurisdiction. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.