Employers Getting Pushed for 1095s Despite Deadline Extension
With the February 1 deadline for distributing Form W-2 to employees rapidly approaching, several employers, particularly those sponsoring self-funded health plans, have reported receiving demands from tax preparers and employees (undoubtedly eager to receive a tax refund) for the new Affordable Care Act ("ACA") Form 1095.
On December 28, 2015, in IRS Notice 2016-4, the IRS pushed back the date employers must distribute Form 1095, which was originally due when the Form W-2 is due. Read IRS Notice 2016-4. Self-funded employers now have until March 31, 2016, to send the Form 1095 to employees notifying them of their health care coverage for 2015.
Under the ACA, every individual must report on his or her individual tax return whether or not he or she (and applicable dependents) have qualifying health insurance coverage in the previous year and, if so, what coverage existed. Beginning with the 2015 calendar year, this information is required to be reported to the IRS and to employees by employers or their health insurance providers. Although the deadline extension is widely known by employers, many employees are unaware of the delay.
The decision by the IRS to delay the reporting date was welcome news for employers, many of whom are struggling with the new complicated and unfamiliar process. However, employees are now realizing that in order to fill out their tax returns - and get their refunds - they need the information from Form 1095. IRS and Treasury officials anticipated the resulting pressure and, on January 11, 2016, posted Q&As directed to individuals explaining the Form 1095 delay implications and gave limited relief, under certain conditions, which would permit employees to go ahead and file their individual tax returns without the Form 1095. Read the IRS guidance on From 1095. Since the requirements are complicated, employers would be well advised to direct employee questions/demands concerning Form 1095 to the IRS website or the employee's tax advisor.
If you need any assistance with these issues, please feel free to contact any member of our employee benefits team.