If Your Business Fails to File Forms 1094/1095-C? 

unfiled 1094 and/or 1095-C IRS forms

Since 2015, the IRS has required employers with over 50 full-time employees to file Forms 1094/1095-C. These forms show that you have offered health insurance to your full-time employees in accordance with the requirements of the Affordable Care Act (ACA). Failure to file these returns can lead to stringent penalties. And right now, the IRS is enforcing the Employee Shared Responsibility (ESR) provisions by cracking down on businesses that aren't filing these forms. Here's what you need to know about these forms and a look at what happens if you don't file them.

What Businesses Need to File Forms 1094/1095-C?

Only businesses with 50 or more full-time employees need to file these forms. To determine if you are required to file, the IRS looks at your average number of employees from the year before.

Here's a quick example. Imagine that you had 40 full-time employees all year long, but during November and December, you had 60 full-time employees. Your average number of employees for the year was 43 so you don't have to file these forms. 

Now let's say that your business averages over 50 employees in 2020. Then, in 2021, you are required to file these forms on behalf of your full-time employees. The IRS calls businesses that need to file these forms "applicable large employers" or ALEs. 

How to Complete Form 1095-C

You need to complete Form 1095-C (Employer-Provided Health Insurance Offer and Coverage) on behalf of all of your full-time employees who were eligible for health insurance coverage through your business. Give them this form whether or not they used your health insurance plan. 

Luckily, the form is short. You just need basic information about your business and your employee. Then, you note which health coverage you offered, the lowest premium that was available, and which months it was available. 

Deadlines for Form 1095-C

The deadline to provide Form 1095-C to your employees is January 31st of the year following the year you offered them health insurance. You can give your employees the form or postmark it by the due date. In some cases, you can provide the form on your website, but you should make sure that your employees know how to access it. 

Note that for tax year 2021, the IRS has extended the deadline for1095-C to March 2, 2022. 

How to Complete Form 1094-C

Form 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns) is the form that you need to send to the IRS when you submit the copies of your 1095-C forms to the agency. It summarizes the details you've put on the 1095-C forms and essentially serves as a "cover letter" for your submission. 

This form requires your business name, EIN, and contact details as well as the number of Forms 1095-C you're transmitting. You also need to choose one of the following certifications of eligibility:

  • Qualifying Offer Method — You offered affordable or minimum value to one or more of your full-time employees.
  • 98% Offer Method — You offered health coverage with minimum value to at least 98% of your employees. 

You also need to note if you are part of an Aggregated ALE group. Typically, in this situation, the aggregate group will file the form on your behalf. 

You can submit a single 1094-C with all of your 1095-C forms. But if you need to submit your 1095-C forms in batches, you should include a 1094-C with each batch of forms that you send.\

Deadlines for Form 1094-C

You need to file Form 1094-C along with copies of your employees' 1095-C forms to the IRS by February 28 if you paper file or March 31 if you e-file. 

Employers with over 250 1095-C forms must e-file. Smaller employers can choose between paper and e-filing. 


Why Do You Need to File Forms 1094/1095-C?

The IRS uses these forms to make sure that large employers are compliant with the rules of the ACA. If you don't file the forms, the IRS can assess penalties. The agency may also look deeper into the situation to see if your business is missing other ACA requirements. 

Failure to meet other ACA requirements can be very expensive. Depending on the issue, the penalties can be several thousand dollars per employee. 

Penalties for Not Filing Forms 1094/1095-C

The penalty for not filing information returns used to be $100 per return. But in recent years, the IRS has increased this penalty substantially. As of 2022, the fee is $280 for each unfiled or incorrect form. 

These penalties can be applied twice to the same return. For example, if you don't provide your employee with a 1095-C and you fail to provide the IRS with a copy, you will incur a total penalty of $560. If you provide your employee with Form 1095-C but forget to send a copy to the IRS, your fee will only be $280. 

Keep in mind that this penalty is per return. If you have 50 full-time employees, the total penalty for failing to provide the 1095-C statement and not filing would be $28,000. The IRS caps these fees at $3.426 million per employer. But again, this amount is doubled if you fail to file and fail to give your employee a copy.

What Happens If You Don't File Forms 1094/1095-C?

These forms have only been required since 2015, and for the first few years, the IRS was relatively lax about compliance. The agency calls this a good-faith transition period. Essentially, that means that the IRS gives businesses time to learn the requirements and get into compliance with new rules. 

Now, however, the rule has been in place for over six years. The IRS is serious about these forms, and it plans to pursue businesses that are not compliant. If you haven't filed these forms, you can expect the IRS to send you a notice in the mail. 

If you disregard the first notice, you should expect to receive notices about penalties or other collection actions. Remember, the IRS has extensive abilities to collect unpaid taxes and penalties, including federal tax liens and assets seizures. Generally, the notice the IRS sends if they believe you have not filed these forms is IRS Letter 5699. This letter explains the filing requirements for these forms and asks why you have not filed. If this form is ignored, the IRS can escalate the issue and assess penalties.

What to Do If You Haven't Filed Forms 1094/1095-C

If you haven't filed Forms 1094 or 1095-C, you should get into compliance now. It's almost always better to contact the IRS proactively than it is to wait for the agency to find you. 

Already receiving notices about these forms? Then, you need to respond quickly before the situation escalates.

What If You Don't Meet the Rules of the ACA

When you file Forms 1094/1095-C, the IRS will review that information and compare it with details reported on your employees' individual income tax returns. If the IRS believes that you have not offered health insurance to at least 95% of your full-time employees, they will propose an Employer Shared Responsibility Payment against you. They will also assess a penalty if you offer coverage to at least 95% of your full-time employees but at least one of them claimed the Premium Tax Credit. The IRS sends out Letter 226-J proposing these penalties and showing their calculations. The IRS also sends Forms 14764 and 14765 for you to complete and respond. 

Get Help With Unfiled 1094/1095-C Forms

You don't have to deal with the IRS on your own. A tax professional can help you deal with unfiled information returns, IRS notices, and penalties. To get help dealing with 1094/1095-C forms, contact a tax pro today. With TaxCure, you can easily search for a professional based in your area, who has the experience you need.

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