In our previous blog, we discussed the end of “Good Faith Relief” for ACA reporting and the potential consequences for non-compliance. Let’s face it, nobody wants to deal with hefty IRS penalties. So, this time around, we’re diving into the nitty-gritty of common mistakes businesses make with ACA reporting and how you can steer clear of them. 

Top Culprits for ACA Penalty Notices: 

1. The COVID-19 Conundrum: Remember those early days of the pandemic when everything felt uncertain? Many businesses with temporarily reduced employee counts mistakenly believed they were exempt from ACA reporting. Here’s the catch: The ACA has specific rules regarding employee counts and how they determine your filing obligations. Even with a temporary dip, you might still need to file depending on your average employee numbers throughout the year. One important measure is that ACA eligibility is determined based on employee counts from the previous calendar year. This means that even if you drastically cut staff in 2020, you would still be subject to filing that year if you were an Applicable Large Employer in 2019. 

2. Employee Classification Errors: Not all employees are created equal, at least when it comes to ACA. Misclassifying employees as full-time, part-time, or seasonal can lead to big trouble. The ACA uses a 30-hour threshold to define full-time employees, so ensure your classifications are accurate to avoid offering coverage to the wrong individuals or missing out on offering it to those who qualify. 

3. The Multi-Business Maze: Do you own multiple businesses? Congratulations! But here’s a crucial ACA detail to remember: The IRS looks at combined employee counts across all your entities to determine if you meet the threshold for the Employer Mandate. Failing to aggregate your employee numbers could result in non-compliance for all your businesses. 

4. Filing Failures: This one seems obvious, but it’s surprisingly common. Not filing the required forms (Forms 1094 and 1095) at all is a guaranteed path to penalty central. These forms report health insurance coverage offered to employees and their dependents. Remember, timely filing is just as important as filing itself. 

5. Furnishing Fumbles: Furnishing essentially means providing copies of the 1095 forms to both the IRS and your employees. Errors in this area can also trigger penalties. Double-check that all employee information is accurate and that the forms are sent to the correct addresses. 

Avoiding the Penalty Pitfall: 

Now that you’re familiar with the common missteps, here are some ways to keep yourself on the right track: 

• Stay Updated: The ACA landscape can shift, so stay informed about the latest regulations and filing requirements. The IRS website is a valuable resource. 

• Seek Professional Help: Consider consulting with a benefits or tax professional specializing in ACA compliance. Their expertise can save you time, money, and a whole lot of stress. 

• Automate When Possible: Technology can be your friend. Explore software solutions that can help streamline your ACA reporting process and minimize errors. 

• Keep accurate payroll and benefits records: Accurate payroll data is essential for a successful and compliant ACA filing process. You’ll also want to ensure that you obtain and store waivers for any employees who decline coverage, as you need to be able to prove that you made a qualifying offer. 

Remember, even if you suspect you’ve made a mistake, don’t panic! Our experts at MP are ready to help you navigate these ACA changes. Talk with an expert today! The next blog post will explore options for addressing potential issues and minimizing penalties if you’ve already received a notice from the IRS. 

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