Recent ACA legislation, which modified the 1095-C furnishing obligations for Applicable Large Employers (ALEs), introduced significant changes that employers must carefully navigate.
Among these is a new six-year statute of limitations for IRS assessments related to ACA compliance. This change underscores the importance of accurate record-keeping and timely action to avoid costly penalties.
Understanding the Six-Year Statute of Limitations
Historically, the IRS followed a three-year statute of limitations for most tax-related assessments. However, under the Employer Reporting Improvement Act, the statute of limitations for ACA-related assessments has been set at six years. This applies specifically to employer filings for Forms 1094-C and 1095-C.
The statute of limitations begins on the later of the following:
- The date the employer furnishes the 1095-C to employees and files with the IRS.
- The original or extended due date of the filing.
This timeframe gives the IRS more leeway to review, assess, and penalize employers for non-compliance or errors in reporting, emphasizing the need for sustained accuracy and vigilance.
Implications for Employers
The new six-year statute of limitations has several critical implications:
- Standard Exposure Period: Employers now face a six-year period of potential liability for ACA-related errors or omissions.
- Heightened Record-Keeping Requirements: Employers must retain all ACA-related records for at least six years, including:
- Employee offers of coverage.
- Affordability calculations.
- Forms 1094-C and 1095-C.
- Correspondence with the IRS regarding ACA compliance.
- Penalty Risks: Where there was previously no statute of limitations, an established standard gives the IRS more bandwidth to punish non-compliance. For instance, failure-to-file or failure-to-furnish penalties can accumulate over time and result in significant financial liabilities.
Navigating Compliance Challenges
To address the challenges posed by the six-year statute of limitations, employers should take proactive measures:
- Audit ACA Processes Annually: Conduct regular internal audits to ensure ACA reporting and filing practices meet IRS standards. Identify and rectify errors promptly to reduce long-term risk.
- Invest in Technology: Leverage ACA compliance software solutions that automate the generation, tracking, and submission of Forms 1094-C and 1095-C. Automated systems can reduce errors and streamline record retention.
- Engage Experts: Partner with ACA compliance experts to navigate the evolving regulatory landscape. These specialists can help mitigate risks, respond to IRS inquiries, and ensure compliance with the extended statute of limitations.
How Trusaic Can Help
The new six-year statute of limitations for ACA compliance assessments places additional responsibilities on employers. By understanding the implications of this change and implementing robust compliance practices, employers can mitigate risks and protect their organizations from significant penalties.
Trusaic’s ACA compliance solutions are designed to eliminate the risks associated with inaccurate data. By automating data ingestion, validation, and reconciliation, our platform ensures that your compliance processes are seamless, efficient, and audit-proof. Don’t let data inaccuracies jeopardize your compliance efforts.
Book a meeting to learn how other companies are responding to the ACA 1095-C furnishing and statute of limitations changes.