The Affordable Care Act (ACA) reporting requirements for certain employers are in the final stretch for the IRS 2022 tax year. Employers generally undergo three different working phases during an ACA reporting season.

• The first and longest phase is preparation. Preparing for reporting may include compiling reports from various sources, ensuring all enrollments and terminations are processed by December 31, double-checking part-time employees’ hours for status changes and confirming third-party technology, data requirements, and timelines are reviewed.

• The second phase is translating all the necessary data into the applicable IRS forms to distribute to employees by the March 2, 2023 deadline.

• The third and final phase is filing the forms with the IRS. Paper filing was due February 28, 2023, and electronic filing is due by March 31, 2023.

Submission to the IRS is not exactly the end of an employer’s responsibility. Employers should consider these two important ACA reporting reminders to close out the season comfortably.

The first reminder

First, be sure to print or download copies of all applicable IRS Forms 1094 and 1095 and prepare to retain them.

Section 107 of the Employee Retirement Income Security Act (ERISA) requires retention for at least seven years, while the IRS requires three years from the date of filing. However, the 2020 memo from the IRS Chief Counsel’s Office confirmed there is no statute of limitation applied to assessing an employer shared responsibility payment under Internal Revenue Code Section 4980H. An employer may consider holding on to ACA filings indefinitely.

When preparing a paper or digital retention file for ACA reporting, consider including copies of all other reports, forms, documentation used to create Form 1095, information about the medical plan, wages and hours worked. IRS ACA reporting audits are happening for tax years 2015 through 2021.

An audit received today can be for a tax year from one or six previous tax years, and employers may find recreating reports and documentation from prior years to be a big challenge. An IRS audit may require an employer to prove an employee’s part-time or full-time status, the method used and wages for affordability, that the plan provided required coverage, and more.

The second reminder

Second, remember to obtain confirmation of the filing status.

• Electronic transmission to the IRS is the quickest method for receiving confirmation that the IRS received and accepted a filing. The IRS generally returns an overall acceptance or rejection status of the entire filing first. Keep in mind:

• Electronic submission may not provide an instantaneous status result. Cautious employers may want to transmit to the IRS well before the due date to have ample time to resolve any potential acceptance issues.

• A filing may be rejected for a mismatch between the business name and federal tax identification number, because a large percentage of individual employee records are rejected, or other reasons.

• The filing requirement is met once the IRS accepts the submission, and an accepted filing will generally produce a confirmation or receipt number. Documentation of acceptance should be retained.

Once the filing is accepted, the IRS returns a status of “accepted,” “accepted with errors,” or “rejected” for each employee record. An employer may need to check back daily until all employee records contain a status.

When an employee record has a rejected status, the employer has 60 days from the date of the initial filing acceptance to resolve and retransmit the record in the same manner it was initially submitted. An employee record is generally rejected when the employee or dependent name and taxpayer identification number do not match, among other reasons.

When all employee records contain a status of accepted or accepted with corrections, the IRS assigns an identification number. The IRS-generated number should be retained as proof of filing. Upon successful filing, the process begins again.

Hopefully, employers will experience a smoother and more streamlined process each year, except when the IRS makes rule changes.