The cost for failing to comply with the new reporting requirements of the Affordable Care Act (ACA) just got steeper. Under a trade bill signed into law by President Obama at the end of June, the penalties for failing to comply with the new reporting requirements, which are used to help the IRS enforce the Individual and Employer Mandates, have substantially increased.

Failing to complete the reporting:

• The penalty has increased from $100 to $250 per applicable employee.
• The maximum penalty has increased from $1.5 million to $3 million per year.
• If an employer fails to submit the reporting to the IRS and also fails to provide a statement to employees, the penalties are doubled.
• If a lack of reporting is caused by intentional disregard, the penalty increases from $250 to $500 per applicable employee, and there is no cap on the amount of the penalty.

Inaccurate or incomplete reporting:

Corrections made within 30 days of the required filing date

• Penalty increases from $30 to $50 per applicable employee
• Annual maximum penalty increases from $250,000 to $500,000

​Corrections made by August 1^st

• ^​Penalty increases from $60 to $100 per applicable employee
• Annual maximum penalty increases from $500,000 to $1.5 million

The new penalties apply for reporting which occurs after December 31, 2015. This means the increased penalties are effective for the first reporting year which is due to the IRS by March 2016. However, it should be noted that the IRS will honor a previous made statement that penalties will not apply during the first reporting year if “good faith efforts” are made to comply with the new reporting provisions. It seems as if penalties will not apply during the first year for reporting which is incomplete or inaccurate, but the good faith efforts standard would not apply if the reporting isn’t completed by the deadline, and therefore penalties could occur in these situations.

It should also be noted that the increased penalties also apply to other types of IRS reporting.  For example, these new penalties also apply to W-2 reporting.

The materials contained within this communication are provided for informational purposes only and do not constitute legal or tax advice.