One of the things that I have grown to admire is when my fellow employees take a task upon themselves without being specifically asked to do it. I also admire those companies that have been able to do the ACA compliance process in house. But I would like to take the opportunity to sound a note of caution.
The IRS penalty assessment rules, regulations are complex and subject to frequent updates. In addition the IRS penalty enforcement posture tax year 2018 is expected to be very diligent.
Best practices we see being used by companies that prepare their own 1095 Forms is to have an independent expert audit the data before it is sent to the IRS.
In our case we use BenefitScape’s VeriTracACA© software to audit the ACA data before it is filed to the IRS, producing a very useful potential penalty assessment. With this data in hand the employer can take to modify the data to eliminate any unnecessary penalties.
Our internal systems produced the results why should we suspect they could be wrong?
We have the opportunity to handle millions of individual ACA data elements and we find that because this process is still new and frankly has been subject to a fair degree of political turmoil software used to create the results has not caught up with the complexity of the ACA codes and reporting structure. Think about it, payroll has been with us for a half a century and it still struggles to come up with accurate filings given state laws, federal regulations and new requirements such as daily pay. This is no knock on the software the best practice recognizes that ACA filing is complex and if you want to be certain you are avoiding unnecessary penalties a pre-filing audit is necessary.
Be very wary of leaping into an unnecessary penalty situation with the IRS!
Even though you may not have penalties because you are providing adequate health coverage having to answer to and Responding to an IRS demand can be an overwhelming task. It’s obviously better to avoid it when you can.
Once the IRS has determined a penalty and issued Letter 226-J the organization is immediately thrown into a defensive position. The 30-day timeframe for a response is very limited and may jeopardize an organization’s ability to dispute the penalty. The IRS has taken a position that the penalty will stand unless an organization comes forward to contest it and prove otherwise. Make no mistake, once you receive letter 226J you are dealing with a tax matter. As with all tax remedy issues the IRS has prepared a number of pathways to dispute any potential penalty; ranging from written responses to requesting a conference with the IRS Office of Appeals. Needless to say these efforts can be burdensome, time-consuming and expensive. . More information on the difficulties employers face when they have received penalty notifications is http://benefitscape.consulting/IRS-Penalty-Notice
Capturing IRS guidance in software rules is the safest and most efficient way to insure ACA compliance. This is what we have done with VeriTracACA©
Using BenefitScape’s VeriTracACA© software will put you on the offense and potentially eliminate any need for penalty remediation efforts. If it does appear that an organization will incur certain penalties it is obviously better to be aware of these issues and take steps to remedy them rather than being caught by surprise.
BenefitScape is providing a FREE penalty assessment using our VeriTracACA© software. We would be pleased to audit your data prefiling at no cost to you. If you’d like to discuss this option please feel free to give us call or contact Kim Phillips at Kim.Phillips@BenefitScape.com
Remember forewarned is forearmed and if letter 226J arrives it should not be a surprise you should have a complete awareness of any potential penalties.