The IRS Gears Up to Enforce Corporate ACA ESRP Compliance

The IRS Gears Up to Enforce Corporate ACA ESRP Compliance

Enforcement shifts are rumbling in Washington regarding a section of the Affordable Care Act (ACA). New actions could find your business exposed. Kyle Scott, AVP of Compliance, discusses four Employer Shared Responsibility Payments (ESRP) developments to keep an eye on in her recent byline published by Corporate Compliance Insights.

With the U.S. Supreme Court throwing out the lawsuit against the ACA in June – thereby guaranteeing the ACA’s continuation as law of the land – compliance professionals should be aware that there are kettles brewing in Washington that could cause America’s corporations to face tens of millions of dollars in IRS penalties for not complying with the act’s ESRP provision:

    • Proposed sunsetting of the good faith reporting standard,
    • The Biden administration continuing to propose an increase in the IRS budget to ensure compliance with tax laws by corporations (along with high-income individuals),
    • The IRS declaration that there is no statute of limitations for ACA ESRP, and
    • The Treasury Inspector General for Tax Administration (TIGTA) placing public pressure on the IRS to collect more in ACA ESRP penalties.

A closer look at each of these bubbling cauldrons shows how they can affect your ACA compliance.

Proposed Sunsetting of the Good Faith ESRP Reporting Relief

When the ACA was established more than 10 years ago, the IRS initiated what is known as good faith relief – a grace period to assist employers temporarily as they became familiar with the ESRP reporting process and form furnishment requirements. This grace period exempted eligible employers from penalties for certain missing or inaccurate information.

Eligibility for relief under the good faith standard required that the employer makes a reasonable, good faith effort to gather required data, transmit 1094/1095 forms to the IRS, furnish forms to taxpayers and comply with ESRP regulations. In late 2020, the IRS indicated its intention to discontinue good faith relief for future reporting, unless it received persuasive public comment to the contrary.

Sunsetting of good faith relief could increase employer penalties drastically for those whose forms are not fully complete and accurate by IRS standards (including SSN/TIN data) by the IRS form submission deadline. Furthermore, penalties can be assessed for incorrect forms furnished to taxpayers. Today each situation carries a penalty of $280 per return, increased to $550 per return if noncompliance is intentional. Penalties are capped based on filing date and company revenue, with a maximum of just over $3.3 million, unless there is intentional noncompliance (for which the cap is removed).

The full article is available here: “These 4 ACA Compliance Kettles Are Brewing in D.C. If They Boil Over, Your Business Should Be Ready,” 

This article was originally published on Corporate Compliance Insights and is reprinted here with permission.