Does the good-faith effort reprieve from penalties apply to forms for 2016 filed in 2017?

Visit Website View Our Posts

As employers continue to work through the challenges of complying with the Affordable Care Act, professionals in the industry are reticent to accept anything less than perfection when dealing with IRS regulations. Why? To alleviate any concern about potential penalties due to non-compliance down the road.

In Notice 2016-70 dated December 5, 2016, the IRS made clear some important information for employers. In addition to extending the deadline for supplying employees with the required ACA Information Returns (forms 1095-C and 1095-B) by March 2nd of 2017, the IRS also extended good-faith transition relief under I.R.C. Section 6721 and 6722 for required reporting under I.R.C. Sections 6055 and 6056 for 2016.

Good faith effort defined by the IRS in Form 1095-C instructions imageRemember: This now applies to 2016 reporting as well

This is great news as employers are still struggling to correctly understand, interpret and apply the reporting requirements for their organizations. While it is important to remember that the employer must complete the required forms and do so as accurately as possible, they will not have to be overly concerned about potential inaccuracies on the forms sent to the employee and the IRS. The following excerpt from the notice spells this out in detail:

“Specifically, this notice extends transition relief from penalties under sections 6721 and 6722 to reporting entities that can show that they have made good-faith efforts to comply with the information-reporting requirements under sections 6055 and 6056 for 2016 (both for furnishing to individuals and for filing with the Service) for incorrect or incomplete information reported on the return or statement. This relief applies to missing and inaccurate taxpayer identification numbers and dates of birth, as well as other information required on the return or statement.”

For many employers, personal standards override the government rule. We are hearing that when faced with such new and intensified requirements for workforce reporting, employers immediately equate “good-faith effort” with “mistakes.” To them, that’s not acceptable regardless of what official word they have from the ACA enforcement agency.

This is what Carol Wright, HR and Benefits Specialist from Greenleaf Nursery, a Park Hill, Okla.-based ALE business, says on the topic:

“The government may not impose a penalty for incomplete or incorrect information on ACA returns, but for me this is a reflection on me and my work. I want the forms to contain correct information for our employees.”

It is important to understand what brought about the ‘good-faith’ reprieve.

ACA to-dos for Tax Year 2016 and must-dos for Tax Year 2017 image

Though the need for 1095-C perfection is arguable for Tax Year 2016, the worry factor is significant. In addressing related questions we get from time-crunched perfectionists, we remind our clients:

“As we go through this journey, it’s natural for all of us – even the IRS – to be worrying a lot. What we’re really talking about here is not accuracy. It’s about coming to terms with the understanding that, for the first time since 1944 – when W-2s were first produced – employers are required to do a new type of deep tracking and reporting of information on their workforce.

“And as a result, the good-faith reprieve for 1095-Cs is something that is important to acknowledge.

“More than the information itself, the IRS wants conversations to be happening about the information:
• ‘How do I have to comply?’
• ‘What do I have to do?’
• ‘What do I have to report?’

“Although we said this last year as well, you probably will never see this again from the IRS, where they say, ‘You know what? It’s OK if the information you send us isn’t exactly correct – just get the processes in place, so that you do get to the point of sending us correct information next year.’”

Visit the IRS ALE Info Center for additional questions and answers.

For Integrity Data’s compiled ACA Education, click here.

To learn more about Integrity Data’s ACA Compliance Solution, click here.

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Show Buttons
Hide Buttons