8875 / Will an employer receive a notification if it owes a shared responsibility penalty under the ACA?

Yes. According to IRS guidance, an employer will receive a notification if one or more of its employees has received the premium tax credit that can generate employer liability for a shared responsibility penalty. The IRS will then contact the employer with a determination of whether it owes a shared responsibility payment, giving the employer an opportunity to respond before a notice and demand for payment is made. Such contact will not be made, however, until after the due date for the individual employees’ tax returns for the year, as this is how the individual employees will claim premium tax credits. The date of contact will also be delayed until after the filing deadline for the returns of applicable large employers that outline the number of full-time employees and any coverage offered.¹

Planning Point: In late in December 2022, the IRS released final regulations² to permanently extend the 30-day reporting relief provided in prior years. Taxpayers could rely on earlier proposed regulations for tax years beginning after December 30, 2020. As a result, the deadline for furnishing Forms 1095-B and 1095-C to individuals is now 30 days after January 31 of the year following the tax year in question (for 2025, March 3, 2024). For part-time employees and non-employees enrolled in the plan, the employer is not required to mail the forms to the plan participants under the regulations. Instead, they can provide a clear and conspicuous notice on the website stating that these individuals can request a copy of their statement (employers must continue to send the forms to full-time employees).

Form 1094-C and Form 1095-C that must be provided to the IRS are not subject to the extension. The employer must furnish these filings to the IRS by February 28 if the filing is on paper and March 31 if the employer is filing electronically. For 2020 only, the IRS extended the relief that may allow employers to escape liability if they made a good faith effort to comply with all filing requirements (the proposed regulations would eliminate the good faith penalty relief entirely).

Under current law, employers that submit 250 or more of the same form must use electronic filing systems. However, the IRS has proposed a new rule that would require nearly all employers to file electronically (lowering the threshold to 100 forms in 2022 and ten forms starting in 2023). Employers would also be required to aggregate all forms that they have submitted.