Penalty Notifications Could Be in the Mail
Compliance matters! If you are among the non-compliant employers who failed to comply and file appropriately for the Affordable Care Act in 2015 or 2016, you may be seeing penalty notifications soon.
May 31, 2017 was the target date for the IRS to deploy the ACA Compliance Validation System (ACV), which will be used to identify potentially noncompliant Applicable Large Employers and calculate the proposed Employer Shared Responsibility Payments.
If it is successful at identifying non-compliant employers and imposing penalty notifications beginning May 31, then the revenue generated could amount to $167 billion from 2016 to 2025, according to the Joint Committee on tax estimates.
IRS Fine Tunes Audit Processes
The validation system has been in the works for several years now. According to an April 7, 2017 report, findings issued by the U.S. Treasury Department revealed the IRS has done a lot of things right in the development of this system. It confirmed the IRS was working appropriately to ensure employers subject to the Affordable Care Act (ACA) Employer Shared Responsibility Provision were able to comply with reporting requirements.
Although the Treasury report findings also identified areas that needed improvement, the IRS was one step ahead of the audit by already having developed resolutions to most of the challenges.
While the Treasury review uncovered malfunctions in the processes resulting in inaccurate or incomplete data for use in identifying non-compliant employers, the IRS agreed and stated it had already initiated steps to correct these errors for the 2017 Filing Season.
The IRS also acknowledged there were numerous system errors in the first reporting year, but has already remedied them. The IRS responded to each of the challenges with reviews, testing, resolutions and implementation, some of which had already been started with the 2017 filing season.
Interesting for non-compliant employers is that the development and implementation of key systems needed to identify non-compliant employers subject to an Employer Shared Responsibility Payment were delayed, not initiated, or cancelled. The IRS accepted the finding, but stressed the systems were in progress and would be deployed by the end of May 2017.
So far, the IRS has done what it said it would do to fix the Employer Shared Responsibility challenges.
What does this mean to the non-compliant employer? Non-compliant employers should have an immediate plan to become compliant. By starting now, non-compliant employers may be able to minimize filing penalties. Starting to get compliant now could also prevent a full-scale IRS audit that would be costly in both time and money.
The full IRS report can be found at https://www.treasury.gov/tigta/auditreports/2017reports/201743027fr.pdf.
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