Understanding ACA Reporting Penalties for the 2024 Tax Year

The Affordable Care Act (ACA) imposes specific reporting requirements on employers, and failing to meet these obligations can result in substantial penalties. As we head into the 2024 tax year, it’s crucial for employers to understand the potential consequences of non-compliance and take proactive measures to avoid them.

What Is the ACA Employer Mandate?

The ACA’s Employer Mandate requires Applicable Large Employers (ALEs) to offer health insurance coverage that meets Minimum Essential Coverage (MEC), provides Minimum Value (MV), and is affordable to at least 95% of their full-time employees (and their dependents). ALEs are employers with 50 or more full-time and full-time equivalent (FTE) employees.

In addition to offering compliant coverage, ALEs must accurately report employee health coverage information to the IRS through Forms 1094-C and 1095-C. These forms detail the coverage offered and whether employees enrolled in the plan. Failure to comply with these reporting requirements can result in significant penalties.

Penalties for Non-Compliance

1. Section 4980H(a) Penalty: Failure to Offer Coverage

If an ALE fails to offer health insurance to at least 95% of its full-time employees (and their dependents), and at least one full-time employee receives a premium tax credit on the ACA marketplace, the employer will be subject to a penalty.

• Penalty Amount:
  For the 2024 tax year, the penalty is estimated at $2,970 per full-time employee (excluding the first 30 employees).

2. Section 4980H(b) Penalty: Coverage Not Affordable or Lacking Minimum Value

If an ALE offers health insurance, but the coverage either:

• Does not meet Minimum Value (MV) standards,
• Is not deemed affordable, or
• Is not extended to eligible dependents,

and at least one employee receives a premium tax credit, the employer faces a penalty.

• Penalty Amount:
  The penalty for 2024 is estimated at $4,460 per affected employee who receives a premium tax credit.

3. Failure to File Accurate Forms 1094-C and 1095-C

Timely and accurate filing of ACA forms is a critical compliance requirement. The IRS issues penalties for missing deadlines, filing incorrect information, or failing to file altogether.

• Penalty Amounts for 2024:
  • Failure to file: Up to $310 per return, with a maximum annual cap of $3,783,000 for large businesses.
  • Failure to furnish: Up to $310 per return, also subject to the annual cap.

These penalties can add up quickly, especially for larger organizations.

Key Deadlines for ACA Reporting in 2025 for the 2024 Tax Year

• File Forms with the IRS:
  • Paper filing deadline: February 28, 2025.
  • Electronic filing deadline: March 31, 2025 (mandatory for employers with 250 or more forms).

Missing these deadlines or filing incomplete forms can lead to additional penalties.

Common Reasons for Penalties

1. Inaccurate Employee Classifications: Misidentifying full-time employees can lead to underreporting and penalties.
2. Data Inconsistencies: Errors in Social Security Numbers (SSNs), employer information, or coverage details can trigger IRS penalties.
3. Missed Deadlines: Failing to furnish or file required forms on time.
4. Insufficient Coverage: Offering plans that do not meet MEC, MV, or affordability standards.

How to Avoid ACA Reporting Penalties

1. Maintain Accurate Records: Ensure employee classifications and hours worked are tracked accurately.
2. Use the Look-Back Measurement Method: For variable-hour employees, this method helps determine full-time status over a defined period.
3. Leverage Technology: ACA compliance software like ACA Track automates data collection, reporting, and error detection.
4. Outsource Compliance: Partnering with ACA-Track.com,  a full-service ACA compliance provider, can reduce errors and ensure timely filing.
5. Conduct a Compliance Audit: Regularly review your ACA compliance processes and address gaps before reporting deadlines.

Final Thoughts

ACA penalties can be a significant financial burden for employers, but they are avoidable with proper preparation and compliance strategies. By understanding your reporting responsibilities, staying informed about deadlines, and leveraging tools and resources, you can minimize your organization’s risk.

Don’t let ACA compliance overwhelm you. For expert guidance, automated tools, and support, visit ACA Track and ensure your reporting for the 2024 tax year is accurate and penalty-free.

Stay compliant, avoid penalties, and protect your business with ACA-Track.com.