Most of us have come to understand that we’re required to be covered under a qualifying health insurance plan and that we must prove to the IRS each year that we were for all the months of the year on our tax returns.
This is referred to as the “individual mandate” and it went into effect on January 1st, 2014 for most of us.
Qualified coverage comes in many forms – one of the most common is through employers.
While providing health insurance to their employees isn’t new for many employers, the data collection and reporting burden that now goes along with providing that coverage certainly is!
In early 2016 for the first time in US history, large employers – generally those with 50 or more FT employees – will be required to report information about the compliance of their organizations with the federal tax code.
IRS Code section 6056 as it is referred to, was established to measure, monitor and manage what’s known as the “shared responsibility” provision of the ACA.
Now, while time consuming and labor intensive, it isn’t quite rocket science and is fairly straight forward once an organization knows and understands what information they are to be capturing and reporting to the IRS –AND most importantly, have a process in place to do so.
That last part tends to be the challenge for many employers and it’s a big one with very little time left to deal with.
The required information to complete the tax forms for employees and the IRS for tax year 2015 typically is NOT information readily available or a part of the payroll system for most employers – AND that’s if this data is even captured and stored properly in the first place. In very simplistic terms, it’s monthly data relating to each employee’s group health coverage and has nothing to do with compensation and the tracking of hours for that purpose, although hours worked by each employee will need to be monitored, measured and readily available, as well.
If you’re waiting until 2016 to deal with understanding the reporting requirements under the law, you may be hit between the eyes with an inescapable nightmare of hours of additional work and backtracking – assuming the information is still available at all.
A high sense of urgency should definitely exist for those that haven’t looked at the requirements of section 6056 and the forms. They have to be distributed by January 31st, 2016 to so discussion with your CPA or tax professional may be a good call. Employers that fail in their obligation face penalties of $100 per tax return associated up to $1.5 million.