IRS Proposed Regulations Expand Mandatory Electronic Filing of Information Returns
The IRS in May published proposed regulations expanding mandatory electronic filing of most information returns – Form W-2, forms in the 1099 series, Form 1095-B, and Form 1095-C. These proposed regulations would be effective for information returns required to be filed after December 31, 2018.
If these rules are finalized as proposed, then filers will be required to file electronically when the combined total number of these forms is at least 250. For example, if an employer files 200 Forms W-2 and 100 Forms 1095-C during 2018, then the employer would be required to file electronically under these proposed rules. In contrast, current regulations apply the 250-return electronic filing threshold separately to each type of return.
Additionally, the proposed rules would also impact corrections. If information returns must be filed electronically under these proposed rules, then any corrected returns must also be filed electronically, regardless of the number of corrected forms filed.
The IRS has always encouraged electronic filing, and the vast majority of information returns are filed in this manner. However, smaller applicable large employers (ALEs), who have filed Forms 1094-C and 1095-C on paper in prior tax years, may need to begin working with a vendor or tax professional who can assist them with electronic filing.
New Website and Guidance Addressing Employer Shared Responsibility Assessments (ESRA) for ALEs
In addition to releasing proposed rules impacting filing requirements, the IRS also recently created a web page providing more detailed guidance on its enforcement of employer shared responsibility penalties (ESRP) against ALEs. Specifically, the web page addresses Letter 227, which is the letter the IRS issues after an ALE has responded to the IRS initial proposal of employer penalties in Letter 226J.
According to this new guidance, Letter 227 exists in five different versions, which include:
- Letter 227-J states that the IRS will assess the ESRP as initially proposed because the ALE agreed to those penalties. No response is required to this letter, and the IRS will consider the case closed.
- Letter 227-K is the preferred version of this letter because it provides that the ESRP has been removed. No response is required to this letter, and the IRS will consider the case closed.
- Letter 227-L provides that the ESRP has been revised, including an updated Form 14765 (Premium Tax Credit [PTC] Listing) and revised calculation table. The ALE can agree or request a meeting with manager and/or appeals.
- Letter 227-M shows that the ESRP has not changed, including an updated Form 14765 (PTC Listing) and revised calculation table. The ALE can agree or request a meeting with the manager and/or appeals.
- Letter 227-N acknowledges the decision reached by the IRS appeals office and shows the resulting penalty amount. No response is required to this letter, and the IRS will consider the case closed.
The IRS emphasizes that Letter 227 is not a bill. Instead, the IRS will issue Notice CP 220J to collect penalties from the ALE. Once assessed, these ESRP payments are subject to lien, and the IRS will charge interest on any outstanding balance until the amount is fully paid.
This latest guidance is further evidence that the IRS intends to continue enforcing the employer mandate. Accordingly, ALEs should ensure that they have copies of previously filed Forms 1094-C and 1095-C, as well as access to supporting payroll and benefits data. Assembling this documentation now will allow ALEs to present a more effective response should the IRS provide notification of proposed penalties.
If you have questions regarding how these proposed rules may impact your filing obligations, please reach out to ETC Companies.