Business owners advised to brush up on new 1095 filing requirements

On Behalf of | Mar 21, 2016 | Tax Controversies

With this year’s April 18 tax filing deadline looming in the not-so-distant future, individual taxpayers and business owners alike are advised to stop procrastinating and take action to ensure that their necessary tax documents are in order. While many parts of the U.S. tax code may seem archaic, from time to time, the Internal Revenue Service does like to make surprise adjustments and rule changes which can result in unsuspecting business owners being penalized.

For business owners, one of the most notable tax changes for 2015 relates to mandated requirements under the Affordable Care Act. This filing year, businesses are required to file the new IRS form 1095 which is used to verify health insurance coverage information including how many employees participate in an employer-provided health insurance program.

When it comes to filing requirements for the 1095 form, businesses with less than 50 full-time employees are exempt. What a business owner may fail to realize, however, is that the sum of their full-time equivalent may in fact push them over this quota. Say for example, that a company employees a total of 45 full-time employees and 20 part-time employees. If the sum of the total weekly work hours for those 20 part-time employees adds up to that of 10 full-time employees, under ACA guidelines, an employer would be required to file form 1095.

The IRS also has specific requirements with regard to how 1095 forms must be filed. For example, an employer who plans to file 250 or more 1095 forms is required to do so electronically. This year, because the rule is new, the IRS is likely to be more lenient about the electronic filing requirement. However, like all IRS rules and requirements, the onus is on a business owner to ensure that a company is compliant with IRS rules and laws and the IRS may fine on noncompliant parties.

To prove just how serious the agency is with regard to ensuring that business owners are in compliance with IRS filing requirements, this year, the IRS increased the maximum late or incorrect-filing penalty amount for businesses from $500,000 to $1 million.

Source: Accounting Today, “Top 10 Form W-2, 1099 and 1095 Myths vs. Realities,” March 21, 2016