What is IRS ACA XML filing and why is it required?

IRS ACA XML filing is the process of submitting ACA Forms 1094-C and 1095-C electronically in a specific XML format as required by the IRS for employers with 250 or more full-time employees. This filing allows the IRS to accurately track employer health coverage offers and employee eligibility for ACA compliance.

Who needs to file ACA reports electronically with the IRS?

Employers classified as Applicable Large Employers (ALEs) with 250 or more full-time or full-time equivalent employees must file ACA returns electronically using IRS-approved XML schema through the AIR (Affordable Care Act Information Returns) system.

What are the key steps to ensure successful ACA XML filing with the IRS?

Key steps include collecting accurate employee hours and benefits data, calculating eligibility based on ACA rules, generating Forms 1094-C and 1095-C in the required XML format, validating the XML file against IRS schemas, obtaining a Transmitter Control Code (TCC), and submitting the file electronically before IRS deadlines.

What are the penalties for failing to file accurate IRS ACA XML reports on time?

Employers who fail to file or furnish accurate ACA forms timely may face penalties ranging from $50 to $270 per form, with maximum caps that can exceed hundreds of thousands of dollars. Severe noncompliance can also result in IRS Letter 226-J notices assessing shared responsibility penalties.

IRS ACA XML Filing: Explained for Beginners

Navigating the complexities of ACA compliance can feel like decoding a foreign language, especially when it comes to the IRS ACA XML filing process. If you’re an employer or part of a benefits administration team, understanding how to properly prepare and submit ACA reports electronically to the IRS is critical to avoiding costly penalties and maintaining regulatory compliance.

This beginner-friendly guide breaks down the essentials of IRS ACA XML filing, explains why it’s important, and shows how the right tools and services, like ACA-Track, can simplify this complicated process for your business.

What Is IRS ACA XML Filing?

Under the Affordable Care Act (ACA), applicable large employers (ALEs)—those with 50 or more full-time or full-time equivalent employees—are required to report detailed information about the health coverage they offer. This reporting is done via IRS Forms 1094-C and 1095-C. For companies with 250 or more employees, this data must be submitted electronically using the IRS’s AIR (Affordable Care Act Information Returns) system, which requires the data to be formatted as an XML file according to IRS technical specifications (schemas).

Why XML?

XML (Extensible Markup Language) is a standardized way of structuring data to ensure it’s readable and processable by computers. For the IRS ACA filings, the XML format allows complex reporting data about employee coverage to be transmitted securely and accurately.

The ACA Reporting Process in a Nutshell

Data Collection: Employers must gather comprehensive data on employee hours worked, health coverage offers, enrollment status, and waivers. This includes tracking full-time, part-time, variable hour, and seasonal employees.
Determining Eligibility: Using the data, employers identify which employees qualify as full-time under ACA rules (typically 30+ hours per week on average) and therefore must be offered coverage.
Completing Forms: The data populates IRS Forms 1095-C (sent to employees) and 1094-C (transmitted to the IRS).
Generating XML File: For electronic submissions, this data must be converted into the IRS XML schema-compliant format.
Electronic Filing: The XML file is uploaded securely to the IRS AIR system by the filing deadline.

Challenges in ACA XML Filing

Data Integration: ACA compliance requires pulling data from multiple sources—payroll, HRIS, time tracking, benefits systems—which can be fragmented.
Accuracy & Validation: XML files must pass stringent IRS schema validation. Any errors can lead to rejection or IRS penalties.
Timely Filing: The IRS deadlines are strict, and extensions are rare for electronic submissions.
Penalties for Errors: Incorrect or late filings may result in heavy penalties and IRS notices, including the dreaded Letter 226-J.

How ACA-Track Simplifies Your IRS ACA XML Filing

ACA-Track offers a robust ACA compliance solution designed to tackle these challenges head-on:

Comprehensive Data Collection & Monitoring

ACA-Track seamlessly collects actual hours worked for all employee types—full-time, part-time, variable-hour, and substitutes—across multiple systems like payroll, time clocks, and mobile entries. This ensures no employee’s data slips through the cracks.

Accurate Eligibility Tracking

It monitors employee eligibility thresholds with automated alerts, ensuring you know exactly when employees cross full-time status during measurement periods. This proactive monitoring reduces compliance risks.

Effortless IRS Reporting

ACA-Track electronically creates all required ACA forms (1094-C and 1095-C) and generates IRS-compliant XML files ready for electronic submission. The software performs monthly line code audits and variable hour tracking, so your filings are precise and audit-ready.

Error Detection and Correction

With built-in validations and color-coded warnings, ACA-Track helps identify and fix reporting errors before submission, minimizing IRS rejections and penalties.

Dedicated Client Support

A dedicated Client Success Advisor guides you through ACA compliance, helping with setup, data integration, and filing—making the entire process less daunting.

Why Electronic Filing is Essential

If your company employs 250 or more full-time employees, the IRS mandates electronic filing of ACA returns via the AIR system using XML files. Even smaller employers benefit from electronic filing for accuracy and speed.

The process of obtaining a Transmitter Control Code (TCC) to submit electronically requires advance planning—applications should be submitted 45 days before filing deadlines. ACA-Track simplifies this by ensuring files conform to IRS schemas, streamlining the approval and submission process.

Avoiding Penalties With Accurate ACA Filing

Failure to comply with ACA reporting requirements can lead to significant penalties, including:

Late Filing Penalties: Up to $270 per form, increasing with delay and maximum caps.
Shared Responsibility Payments: Penalties for not offering affordable minimum value coverage to full-time employees.
IRS 226-J Penalty Letters: Formal IRS notices detailing penalty assessments and demanding responses.

With ACA-Track’s error checking and detailed reporting, your business can confidently avoid costly mistakes that trigger penalties.

The Bottom Line: ACA-Track is Your Compliance Partner

The IRS ACA XML filing process, while complex, becomes manageable with the right software and support. ACA-Track offers a user-friendly, secure, and data-driven platform to:

Collect and integrate employee hours worked from diverse sources.
Monitor employee eligibility and compliance status with alerts.
Generate IRS-compliant ACA forms and XML files for electronic submission.
Detect and correct errors to avoid IRS penalties.
Provide dedicated support tailored to your business’s needs.

If you want to be confident in your ACA compliance and make IRS ACA XML filing easy, check out ACA-Track. Their proven solutions ensure your business stays compliant, saving you time, resources, and risk.

Additional Resources

IRS ACA Filing Schemas & AIR System Info: IRS AIR Portal
Understanding IRS Letter 226-J: IRS 226-J Explanation

In summary, ACA reporting is a critical but complex obligation for many employers. Leveraging a specialized compliance solution like ACA-Track helps simplify data collection, ensures accurate and timely IRS XML filing, and provides peace of mind against penalties. Whether you’re new to ACA reporting or seeking a better way to manage your filings, ACA-Track is a trusted partner to keep your ACA compliance on track.