Groundhog Day – IRS Delays Form 1095-C Deadline
On Friday, the IRS issued a Notice that extends the deadline for large employers (generally those with 50 or more full-time equivalent employees in the previous year) and self-insured group health plans to distribute Forms 1095-C to employees and plan participants. This guidance looks almost identical to the relief provided for the 2019 tax year. The normal deadline to distribute Forms 1095-C is January 31st. This IRS Notice delays the deadline for distributing the 2020 forms until March 2, 2020. Due to this automatic extension, the IRS will not be granting additional 30-day extensions upon request. Therefore, employers must ensure that they distribute their Forms 1095-C to all full-time employees and participants in their self-funded plans no later than March 2nd.
Consistent with the relief provided in prior years, the IRS is not extending the date for filing Form 1094-C and copies of Forms 1095-C with the IRS. For employers that are filing electronically, this deadline is March 31, 2021, and for employers who are filing in paper form (which is only permissible if you are filing 250 or fewer Forms 1095-C), the deadline is February 28, 2021.
The IRS also extended the new transition relief provided last year due to the Tax Cuts and Job Act reducing the individual shared responsibility payment to zero beginning in 2019. The IRS will not enforce the failure to report penalties against self-insured employers if Forms 1095-C are not sent to individuals that are not full-time employees (e.g., part-time employees, retirees). This relief is limited, and the IRS is still requiring Forms 1095-C to be sent to full-time employees. Further, the relief is only allowed if the employer posts a notice prominently on its website and furnishes Form 1095-C to any individual upon request within 30 days. Forms 1095-C must still be submitted to the IRS for all individuals in the plan, so the only real benefit from this relief would be the money saved from not mailing the forms to non-full-time participants.
The IRS has also extended the good faith transition relief for another year. This good faith transition rule provides relief from the reporting penalties assessed on employers if they can show that they made a good-faith effort to comply with the requirements, but still had incorrect or incomplete information on their forms. In determining whether an employer acted in “good faith,” the IRS will consider whether an employer made reasonable efforts to prepare for reporting the required information to the IRS and furnishing it to employees, such as gathering and transmitting the necessary data to an agent to prepare the data for submission to IRS, or testing its ability to transmit information to IRS. It is important to note that, like previous years, this good faith relief is only available to those employers who timely submitted Forms 1094-C and 1095-C. It is not available for failure to timely furnish or file a form. Therefore, employers who are still struggling to gather correct information by the deadline should timely file their forms with the incomplete or incorrect information and correct it later (opposed to filing correct forms late).
The only thing that is new in this year’s Notice is that the IRS has stated that this is likely to be the last year that it provides this relief. It had previously requested comments on whether this extension and good faith relief was still necessary. Due to receiving very few comments, the IRS believes this relief is no longer necessary. Unless it receives comments requesting this relief continue, this will be the last year for this relief. If you disagree that relief is no longer necessary, the Notice provides the address to submit your comment.