ACA Information on Penalties to Applicable Large Employers (ALE)

Please be sure to review IRS.gov on the many FAQ's they have posted regarding the Affordable Care Act (ACA).

I found and wanted to post a specific entry regarding Information Reporting Penalties: 

http://www.irs.gov/Affordable-Care-Act/Employers/Information-Reporting-by-Applicable-Large-Employers

TLDR; There are very serious penalties, starting at $100/wrong statement.  It is not clear what types of situations count towards reasonable cause for abatement.

Information Reporting Penalties

An ALE member that fails to comply with the information reporting requirements may be subject to the general reporting penalty provisions under section 6721 (failure to file correct information returns) and  section 6722 (failure to furnish correct payee statement).

  • The penalty for failure to file an information return generally is $100 for each return for which such failure occurs.  The total penalty imposed for all failures during a calendar year cannot exceed $1,500,000. 
  • For returns required to be filed after December 31, 2015, the penalty for failure to file an information return generally is increased from $100 to $250 for each return for which such failure occurs.  The total penalty imposed for all failures during a calendar year after December 15, 2015 cannot exceed $3,000,000.
  • The penalty for failure to provide a correct payee statement is $100 for each statement with respect to which such failure occurs, with the total penalty for a calendar year not to exceed $1,500,000.
  • The penalty for failure to provide a correct payee statement is increased from $100 to $250 for each statement for which the failure occurs, with the total penalty for a calendar year not to exceed $3,000,000.  The increased penalty amount applies to statements required to be provided after December 31, 2015.
  • Special rules apply that increase the per-statement and total penalties if there is intentional disregard of the requirement to furnish a payee statement.

The waiver of penalty and special rules under section 6724 and the applicable regulations, including abatement of information return penalties for reasonable cause, may apply to certain failures under section 6721 or 6722.

Cornell University Law School put a nice summary together outlining Section 6722:

https://www.law.cornell.edu/uscode/text/26/6722

Have more questions? Submit a request

1 Comments

  • 0
    Avatar
    Jonathan

    Here’s the language on non-enforcement - http://www.irs.gov/irb/2014-13_IRB/ar08.html

    7. Penalties

     
    The proposed regulations applied to calendar years beginning after December 31, 2014. Under Notice 2013–45 (2013–31 IRB 116), the IRS will not apply penalties for failure to comply with section 6055 for 2014 (for coverage in 2014 and information returns filed and statements furnished to covered individuals in 2015).

    A commenter requested that the effective date of the section 6055 reporting requirements be extended an additional year if final regulations are not released by January 1, 2014, thus requiring no reporting in 2016 for coverage in 2015. Other commenters requested that the IRS waive penalties for reporting in 2016 on 2015 coverage if a reporting entity makes a good faith effort to comply. One commenter requested that penalties be waived for the two years following the release of final regulations.

    In implementing new information reporting requirements, short-term relief from penalties frequently is provided. This relief generally allows additional time to develop appropriate procedures for collection of data and compliance with these new reporting requirements. After considering the comments received, the IRS will not impose penalties under sections 6721 and 6722 on reporting entities that can show that they have made good faith efforts to comply with the information reporting requirements. Specifically, relief is provided from penalties under sections 6721 and 6722 for returns and statements filed and furnished in 2016 to report coverage in 2015, but only for incorrect or incomplete information reported on the return or statement, including TINs or dates of birth. No relief is provided in the case of reporting entities that do not make a good faith effort to comply with these regulations or that fail to timely file an information return or furnish a statement. However, consistent with the existing information reporting rules, reporting entities that fail to timely meet the requirements of these regulations may be eligible for penalty relief if the IRS determines that the standards for reasonable cause under section 6724 are satisfied.

    Complements to Chris Vanderwolk @ Benefit Tax Link!

Please sign in to leave a comment.