What You Need To Know To Maintain Your IRS Compliance During An Acquisition


One of the most challenging changes that a business can experience is an acquisition. This process involves upheaval and legal guidelines, this is a lot of work for both employees and leadership to take on. 

With all of these added stresses, it can be easy to place your ACA compliance on the back burner. Our advice…DO NOT give into temptation, stay vigilant when it comes to your ACA reporting. You will thank yourself later and you won’t get metaphorically “burned” by the IRS!

ACAwise is here to guide you, let’s break down how to conquer your acquisition without compromising the quality of your ACA reporting.

What is the Difference Between an Acquisition and a Merger?

These are two terms in business that can be easily confused, so let’s start out by defining the differences between them. While both of these terms refer to joining businesses together, the process is what sets them clearly apart from each other. 

An Acquisition is the process of one business entity taking over another. This doesn’t result in a new company, rather the smaller business entity is absorbed into the larger company that has purchased. The intention of an acquisition is basically a complete takeover.

A merger refers to the blending of two business entities. Neither has absolute power and the intention behind this business decision is to create a new, larger entity with mutual benefits for each party.

Note: Because of the negative connotations that have been formed around the term “acquisition”, some of the large business entities that are acquiring a smaller business entity will use the term “merger” instead. This alleviates negativity or defensiveness that the smaller company’s employees may be experiencing. 

What Does An Acquisition Look Like? 

There are many steps to an acquisition, they are all handled with the utmost legal care. There is a lot of market research that goes into a company seeking out a smaller business that would be beneficial to acquire.

Then there is a “courting” process. Where the options are laid out on the table for upper level management and their legal teams to consider. There are negotiations and demands that are laid out before a contract is or is not signed.

After this, a team is put together to manage the many different legal matters and general issues that will arise as the leadership, brand, and priorities of the smaller business entity shift. 

What Are The Biggest Challenges To Staying Compliant During This Process?

The biggest challenge during this process is to be sure that employees’ hours are being monitored. As employees exit and enter, it is important to monitor their positions. To stay compliant with the IRS, you must be making an affordable offer to all full-time employees.

If the health insurance coverage that you offer changes during this acquisition, be sure to address this. If neither business entity was considered a large applicable employer before this acquisition, you most likely are now. 

The biggest favor you can do yourself is to be sure that someone on your staff has the knowledge needed to handle ACA reporting as the changes happen, or find an ACA reporting provider that will take this burden off of you. 

How To Reassess Your ALE Status 

It is crucial to determine your ALE status during the acquisition process. You may not have been considered by the IRS to be an ALE prior to this acquisition, but you may be now. 

Ask yourself, “Do I now employ 50 or more full-time employees or the equivalent of 50 or more full-time employees?”

If you are unsure, that’s alright! ACAwise has created an ALE Status Calculator to take out the guesswork. All you have to do is enter the hours of your employees, and we will help you figure it out instantly.

The Full-Service Solution

If you are too busy trying to bring your business into the next phase of its existence, we understand! Our team of experts at ACAwise are here to ease the burden of ACA reporting. If you’re thinking to yourself this ACA reporting season, “Wow, I never want to deal with that again”, it’s time to give us a call.

Not only are we able to handle your electronic filing and the distribution of your recipient copies, now we are able to take over your monthly compliance monitoring.

Getting behind on your ACA deadlines? Let’s get started today!


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