It’s that time of year again, the IRS has released the drafts of Form 1095-B and 1095-C for the upcoming ACA reporting for tax year 2023. It is important to note that the IRS has not finalized these drafts, and until they do so, it is still possible for additional changes to be made.
This blog will provide an overview of what the new drafts entail, any notable changes, what’s new in terms of reporting requirements, and when businesses should start the preparation process.
What is ACA Form 1095-B?
This form is a filing requirement for any organization that provides minimum essential coverage health insurance to individuals. Under the Affordable Care Act (ACA), insurance providers must report certain information about the health insurance coverage that they offered, the IRS uses this information to verify that the coverage was affordable and the individual was enrolled in coverage.
Form 1095-B should also be completed by any employer that offers their employees self-funded health insurance coverage, regardless of how many employees are on their payroll.
Applicable organizations that fail to complete this reporting requirement will be penalized by the IRS.
This form is a filing requirement for applicable large employers (ALE). The IRS defines ALEs as employers that have 50 or more full-time or full-time equivalent employees on their payroll.
Under the ACA, ALEs are required to offer all of their eligible employees affordable, minimum essential coverage. This requirement is the Employer-shared Responsibility Provision, covered under IRS Section 6056. Failure to meet this requirement will result in IRS penalties.
To check out the new draft of Form 1095-C, click here.
What’s New on the 2023 Forms 1095?
There are actually no notable changes to either Form 1095-C or 1095-B. This is good news, if you have completed the ACA forms for previous tax years, the process of gathering the information and filling out the forms will essentially remain the same.
What about Recipient Copies Distribution for 2023?
In addition to filing Forms 1095-B and 1095-C with the IRS and attaching the transmittal Form 1094-B or 1094-C, filers must also distribute a copy of the forms to the covered individuals.
In previous tax years, the deadline for distributing Form 1095 copies was January 31st. However, the deadline was extended by the IRS each year, automatically moving it forward to March 2nd. At the end of 2022, the IRS made this extension a permanent fixture. Going forward the deadline for distributing recipient copies is March 2nd.
Major Updates to the IRS E-filing Thresholds
While there are no notable changes to the 1095 forms for the 2023 tax year, there is a major update to the IRS filing thresholds. The IRS currently allows businesses to paper file up to 250 forms. This is not a collective number, for example, a business could file 250 1095 Forms as well as 250 W-2 Forms without penalty.
However, the current thresholds are completely changing according to an IRS notice that was released back in February. To view the complete IRS document, T.D. 9972, click here.
According to this update, effective in 2024, businesses will only be permitted to file 10 paper forms. To be clear, this is not a collective number. This means that including all their required information returns, the business can only file a total of 10 paper forms.
You may be wondering if this will have a major impact – the answer is YES! This sharp decline in paper filing requirements means that even the smallest businesses will be required to move over to paper filing for the 2023 tax year.
In short, if your organization has depended on filing paper copies of ACA Forms 1095 in past tax years, you will need to find an e-file solution for filing 2024 ACA reporting.
ACAwise: Comprehensive Solution for 2024 ACA Reporting
If the shift to e-filing has your organization scrambling, or you just need to outsource all of the intensive administrative work that goes into the reporting process, ACAwise has the option to meet your needs. As an ACA reporting vendor with years of experience handling the reporting process for our clients, we offer flexible solutions for businesses of every size and scope.
Our team is now accepting clients for the 2023 tax year and we are here to help you set up a plan for smooth ACA reporting, we offer these great solutions:
ACA Code Generation as needed
E-filing with the IRS and required states
Recipient copy distribution via postal mail or secure online access