The IRS is Increasing ACA Penalties for Tax Year 2023

Learn more about the future of IRS penalties for ACA reporting.

The Affordable Care Act requires that applicable large employers and other providers of health insurance coverage report certain information to the IRS using Form 1095-C and Form 1095-B.

Applicable large employers are those with 50 or more full-time or full-time equivalent employees. These forms contain information about the covered individuals, this can be the employee, their spouse, and their dependents if applicable. 

In comparison to many other IRS tax forms, the Form 1095-C and Form 1095-B are lengthy and complex, this makes ACA reporting a tricky process for employers that are required to file. 

The IRS has announced that ACA penalties will be increasing in 2023, this means that employers have a greater incentive than ever to file their ACA forms accurately and on time with the IRS. 

Here’s what you need to know about ACA reporting and penalties. 

When does the IRS Penalize Employers for ACA Reporting?

When an employer fails to file on time with the IRS or fails to file forms with accurate information, the IRS will penalize them. The IRS penalties for ACA reporting are steep and can add up quickly. 

The IRS mandates that any employer filing more than 250 forms must file them electronically, otherwise they can be penalized for this as well. 

What are the different types of Penalties? 

There are two different types of penalties that employers should be concerned with when it comes to ACA 1095 penalties

  • 4980H(a) Penalty: The IRS issues this penalty when an employer fails to offer Minimum Essential Coverage to at least 95% of their eligible employees as required under the Affordable Care Act (ACA). 
  • 4980H(b) Penalty: The IRS issues this penalty when an employer offers an unaffordable health insurance plan to their employees and the employee also receives a premium tax credit over the federal healthcare exchange. 

What are the Increased Penalty Rates for 2023? 

The increased penalty rates for the 2023 tax year are as follows:

  • 4980H(a) Penalty:
    • $240 per employee per month
    • $2,880 per employee (total for the year)
  • 4980H(b) Penalty:
    • $360 per employee per month
    • $4,320 per employee (total for the year)

Avoid Penalties with ACAwise’s Complete Solution

So, where should you start when it comes to deciding what your business needs to maintain IRS compliance? Check out our services, they range from our ACA Core package to our ACA Elite package. 

ACA Core

Do you have the codes for your employees but you want an easy, streamlined way of e-filing your forms? Then the ACA Core services offered by ACAwise are exactly what you are looking for. You can upload your employee information to your ACAwise account, we can accept your data in a variety of forms for your convenience. 

Once we have your data, we will validate it using TIN matching to ensure that all of your employee TINs are correct. We also validate your employees’ addresses against the USPS database to ensure that your recipient copies make it to the correct destination. Now we will generate your copies and you can review them. 

Now, all that’s left is to e-file your ACA 1095 Forms with the IRS and mail out your recipient copies to your employees or choose to give them online access to their forms through a secure portal. 

ACA Elite

If you have no idea where to start with your ACA codes then this package is the best option for your business. Your employee’s payroll data and benefits information is all that ACAwise needs to help you generate the ACA codes for your IRS Form 1095-C.

You get all the benefits of the basic package plus we create all of your codes for you. No matter which package you choose, the ACAwise team will be there at every step of the process!

Talk to an expert today to begin planning your ACA reporting solution



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