IRS Makes Changes to ACA Returns for Companies

The Internal Revenue Service announced its plans to change how employers file reports for the Affordable Care Act (ACA). The new rule lowers the 250 return threshold for mandatory electronic reporting to 10 returns. This change will only allow smaller companies to continue to file using IRS paper forms.

The rule will go into effect in 2024, however, returns that are filed in 2023 will still have the 250 thresholds.

Let’s Break It Down

Here’s a further breakdown of the new rule. It impacts ACA reporting as it relates to forms 1094-B, 1094-C, 1095-B, and 1095-C. Essentially, employers that file at least 10 returns during 2024 must file using the electronic method. According to the IRS, these are the most important parts of the final rule change:

  • Reduce the 250-return threshold enacted in prior regulations to generally require electronic filing by filers of 10 or more returns in a calendar year. The final regulations also create several new regulations to require the e-filing of certain returns and other documents not previously required to be e-filed.
  • Require filers to aggregate almost all information return types covered by the regulation to determine whether a filer meets the 10-return threshold and is required to e-file their information returns. Earlier regulations applied the 250-return threshold separately to each type of information return covered by the regulations.
  • Eliminate the e-filing exception for income tax returns of corporations that report total assets under $10 million at the end of their taxable year.
  • Require partnerships with more than 100 partners to e-file information returns, and they require partnerships required to file at least 10 returns of any type during the calendar year to e-file their partnership returns. 

Businesses can use the free, online portal set up by the IRS to receive help with this new process. 

The Reason Behind the Change

Business owners may be curious as to why the IRS is deciding to implement this change. According to the IRS, in 2021, about 82% of corporate income tax returns were e-filed, while nearly 90% of partnership tax returns were e-filed. To reduce the volume of paper returns that are filed every year, the IRS hopes this change will lighten the burden on government work staff. The move is also expected to free up resources that can benefit taxpayers in being able to improve efficiency. Lastly, the move should reduce the costs associated with shopping, printing, and postage costs.

Something To Remember Before You Go…

  • Businesses can always apply for a hardship waiver if they believe it would be difficult to comply with the new rule.
  • Employers should be figuring out how they will transition prior practices to comply with the new rule.
  • Companies should consider reaching out to a vendor to ensure they comply with the law.
  • The ACA reporting deadlines for filing by paper versus electronic filing are different. 

Make sure you are aware of each deadline. Paper filing is due on the last day of February, however, electronic filing is due on March 31st. Employers should take steps to file by the later deadline in 2024.

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