IRS Extends Deadline to Furnish Form 1095-C and Good Faith Compliance Standard

January 16, 2019

ACTION MAY BE REQUIRED

On November 29, 2018, the Internal Revenue Service (IRS) published Notice 2018-94 to provide additional guidance regarding the distribution deadlines for Forms 1095-B and 1095-C. This notice also resurrects the good faith compliance standard applicable in 2015, 2016, and 2017 and makes it applicable to the 2018 tax year. This Compliance Alert highlights the key components of Notice 2018-94 for Applicable Large Employers.

Applicable Large Employers should take note of the following provisions of Notice 2018-94:

  • Deadline to Furnish Form 1095-B and Form 1095-C to Individuals Extended. Notice 2018-94 extends the deadline by which health insurance carriers and self-funded plans must furnish Form 1095-B to plan participants from January 31, 2019 to March 4, 2019. Similarly, the deadline by which Applicable Large Employers must furnish Form 1095-C to full-time employees is also extended from January 31, 2019 to March 4, 2019. This extension is automatic.
  • Deadline to File Forms is NOT Extended. Notice 2018-94 does NOT extend the deadline to file information returns and information statements with the IRS. The filing deadline remains February 28, 2019 (if filing in paper) and April 1, 2019 (if filing electronically).
  • Good Faith Compliance Standard Extended. Notice 2018-94 also extends the good faith compliance standard that applied in prior tax years to information returns and information statements filed and furnished for the 2018 tax year. This transition relief provides protection from penalties incurred under both Section 6721 and Section 6722. Section 6721 penalizes taxpayers for failure to timely file or filing an incomplete or incorrect information return, while Section 6722 penalizes taxpayers for failure to timely file or filing an incomplete or incorrect information statement. It is important to note that the good faith compliance standard only applies to the failure the filing or furnishing of incomplete or incorrect information statements and returns. It does not provide penalty relief for information statements and returns that are not timely filed and furnished. In other words, self-funded plans and Applicable Large Employers may be subject to penalties for forms that are not provided to individuals and filed with the IRS consistent with the deadlines described above.
  • Correction of Known Errors Required to Satisfy Good Faith Compliance Standard. In determining good faith, the IRS will consider whether the employer made reasonable efforts to prepare for reporting the information to the IRS and furnishing it to employees and covered participants, including whether necessary data was gathered and transmitted to an agent to prepare for submission, and whether the ability to transmit the data was tested. Consistent with prior guidance, correction of known errors is required to demonstrate reasonable efforts to comply under the good faith compliance standard. Known errors that can be corrected should not be disregarded.

CONCLUSION

HCW and Gallagher will continue to monitor new developments in this area as the reporting deadlines approach. Should you have any additional questions, please contact our office at (919) 403-1986.