What are the most common ACA reporting mistakes employers make?

Common ACA reporting mistakes include inaccurate tracking of employee hours, incomplete or incorrect employee data, missing IRS filing deadlines, failure to file electronically when required, and errors in reporting offers of coverage. These mistakes can lead to IRS penalties and audits.

How does ACA-Track help prevent ACA reporting errors?

ACA-Track automates the collection of employee hours from multiple systems, monitors eligibility thresholds, flags data errors with color-coded alerts, and generates IRS-compliant 1094-C and 1095-C forms. It also provides electronic filing support and a dedicated Client Success Advisor to ensure accuracy and compliance.

Why is accurate tracking of part-time and variable-hour employees important?

Accurate tracking is crucial because part-time and variable-hour employees may become full-time under ACA rules based on their hours worked. Without proper tracking, employers risk failing to offer coverage to eligible employees, which can result in penalties.

What penalties can result from ACA reporting mistakes?

Penalties for ACA reporting mistakes can include fines for late or incorrect filings, which can range from $50 to $270 per return, escalating if not corrected promptly. Employers may also face Employer Shared Responsibility payments if coverage requirements are not met.

What should I do if I receive an IRS Letter 226-J penalty notice?

If you receive an IRS Letter 226-J, review the notice carefully and respond within the deadline, typically 30 days. Investigate the reported discrepancies, gather documentation, and consider consulting ACA compliance experts or legal counsel. ACA-Track can help correct errors and prepare a thorough response.

Common ACA Reporting Mistakes & How to Avoid Them

Common ACA Reporting Mistakes and How to Avoid Them

The Affordable Care Act (ACA) compliance and reporting requirements are complex and ever-evolving, posing significant challenges for employers — especially Applicable Large Employers (ALEs). Navigating these complexities is critical to avoid costly penalties and maintain smooth operations. Many organizations struggle with ACA reporting due to common errors that can lead to IRS fines or audits.

In this blog post, we’ll dive into the most frequent ACA reporting mistakes and provide actionable advice on how to avoid them. Plus, we’ll introduce you to a trusted solution that simplifies ACA compliance and reporting: ACA-Track.

Understanding ACA Reporting Requirements

Before tackling common mistakes, it’s essential to understand what ACA reporting entails:

Who Must Report: Employers with 50 or more full-time or full-time equivalent employees (ALEs) must comply.
What to Report: Employers must report whether they offered minimum essential coverage to full-time employees and their dependents using IRS Forms 1094-C and 1095-C.
When to Report: Forms 1095-C must be furnished to employees by January 31, and 1094-C must be submitted to the IRS by March 31 annually.
Data Complexity: ACA reporting requires data from payroll, HR, benefits, and timekeeping systems.

Given these layers, it’s easy to make mistakes—so let’s highlight the common pitfalls.

Common ACA Reporting Mistakes

1. Inaccurate or Incomplete Employee Hours Tracking

A fundamental part of ACA compliance is determining full-time status based on hours worked. Employers often fail to track or properly document variable-hour and part-time employees’ actual hours worked, resulting in incorrect classification.

Why it matters: Without accurate hours, employers risk failing to offer coverage to employees who meet the 30-hour per week full-time threshold or incorrectly offering coverage to ineligible employees, both of which can trigger penalties.

2. Missing or Incorrect Employee Data

Mistakes in employee information — such as incorrect Social Security numbers, hire dates, termination dates, or dependent coverage status — are common and can cause IRS filing rejections or audit red flags.

3. Failure to Meet IRS Filing Deadlines

Delays in furnishing Forms 1095-C to employees or submitting Forms 1094-C/1095-C to the IRS can result in steep penalties. Some employers underestimate the time required for data gathering and validation.

4. Not Filing Electronically When Required

Employers with 250 or more employees must file ACA reports electronically. Failing to file electronically, or not securing a Transmitter Control Code (TCC) in advance, can cause rejected submissions and penalties.

5. Incorrectly Reporting Offers of Coverage

ACA requires detailed codes in Form 1095-C that describe coverage offers, waivers, and affordability. Misreporting these codes leads to errors that could trigger penalty letters such as the IRS Letter 226-J.

6. Ignoring Variable Hour and Seasonal Employees

Employers often overlook tracking seasonal or variable hour employees properly, which complicates measuring periods and eligibility determinations.

7. Insufficient Coordination Between Departments

Data needed for ACA reporting is often spread across HR, payroll, benefits, and finance. Lack of collaboration leads to incomplete or inconsistent data.

8. Not Responding to IRS Penalty Notices Timely

Employers sometimes fail to respond promptly to IRS 226-J penalty letters or misunderstand their content, risking higher penalties and enforcement actions.

How to Avoid These Mistakes: Best Practices

Use a Dedicated ACA Compliance Solution — Like ACA-Track

Manual tracking and reporting leave room for error. ACA-Track offers an integrated, data-driven platform to collect, monitor, and report ACA compliance data accurately.

Collect Actual Hours Worked: ACA-Track integrates with multiple timekeeping and payroll systems to track all employee types’ actual hours worked, including variable and part-time employees.
Monitor Employee Eligibility: The software automatically tracks eligibility thresholds and sends advance alerts when employees approach full-time status.
Comprehensive Reporting: It generates IRS-compliant Forms 1094-C and 1095-C and electronically files them with the IRS, avoiding filing mistakes.
Fix ACA Reporting Errors: ACA-Track identifies and flags potential errors with color-coded warnings for quick resolution.
Dedicated Support: Each client gets a dedicated Client Success Advisor, making compliance simpler and less stressful.

Establish Strong Data Governance

Coordinate closely across HR, Payroll, Benefits, and Finance teams to ensure consistent and complete data.
Regularly audit employee data for accuracy, including Social Security numbers, employment dates, and coverage status.
Track actual hours worked rigorously for part-time and variable hour employees.

Plan Ahead for IRS Deadlines

Start collecting and validating data early in the year.
Obtain or renew your IRS Transmitter Control Code (TCC) well before filing deadlines if filing electronically.
Familiarize yourself with IRS ACA filing schema to ensure electronic data submission meets requirements.

Implement Employee Communication Protocols

Furnish Form 1095-C to employees timely.
Educate employees on their coverage and reporting rights to reduce confusion and inquiries.

Respond Promptly to IRS Correspondence

Take immediate action if you receive a Letter 226-J.
Gather supporting documentation and consult legal or ACA compliance experts to prepare a thorough response.
Confirm who in your organization is responsible for receiving and addressing Marketplace notices.

Why ACA-Track Is Your ACA Compliance Partner

ACA-Track streamlines every step of ACA compliance:

User-Friendly Dashboard: Customize your view and drill down into employee data with ease.
Flexible Configuration: Adjust measurement, administrative, and stability periods, affordability calculations, and waiver codes.
Security: Hosted on a SAS 70 and SSAE 16 certified, SOC 2 type 2 compliant cloud platform, ACA-Track ensures your sensitive data is encrypted and secure.
Integration: Seamlessly works with payroll, HRIS, and financial systems to eliminate duplicate data entry.
Expertise: Backed by PSST’s 30+ years in HR, finance, and benefits technology.

Final Thoughts

ACA compliance is a complex, data-intensive process fraught with potential pitfalls. Avoiding common ACA reporting mistakes requires diligent tracking, accurate data, timely filing, and expert support.

If your organization struggles to keep up or wants to simplify ACA compliance with confidence, ACA-Track offers the proven solutions and expert guidance you need. With ACA-Track, you’ll reduce risk, ensure accuracy, and gain peace of mind—allowing you to focus on running your business instead of wrestling with ACA regulations.

Ready to simplify your ACA compliance? Visit ACA-Track today and discover the plan that fits your needs!