Good News! – But Stay the Course – IRS Notice 2016-70 Provides deadline extension and “Good Faith” transitional relief

The IRS recently issued Notice 2016-70 announcing welcome relief to employers in need of additional time to gather data and analyze year-end information including:

  • the extension of the deadline by 30 days for employers and insurers to provide the 2016 Affordable Care Act reporting Forms 1095-B and 1095-C  to employees from January 31, 2017, to March 2, 2017; and
  • transition relief from information reporting penalties for 2017 to those reporting entities that file Forms 1095-B and 1095-C on a timely basis, as applicable, and can show that they have made a good faith effort to comply with the information reporting requirements of the Affordable Care Act.

 30-Day Extension For Providing Information Returns to Employees

Under the Affordable Care Act (“ACA”), certain employers and other providers of minimum essential health coverage are subject to information reporting requirements under Code Sections 6055 and 6056, which require that they furnish to employees and file with the IRS information about the health coverage that is being offered and/or provided. This reporting is done on Forms 1095-B and 1095-C, with each Form filed with the IRS and copy of each Form furnished to employees and certain covered individuals.

The due date for furnishing copies of the 2016 Forms 1095-B and 1095-C to individuals is January 31 with a potential 30-day extension which can be obtained by submitting a letter to the IRS. However, the Notice automatically extends this year’s deadline to March 2, 2017, allowing reporting entities (employers and insurers) additional time to collect information necessary to distribute the information returns. Because of this automatic extension, the IRS will not formally respond to any extensions requests that have already been submitted by reporting entities. Moreover, unlike last year’s extension to March 31, 2016, the IRS has indicated that no further extension (beyond March 2, 2017) will be granted this year.

Notice 2016-70 does not extend the due date for filing the 2016 Forms 1095-B and 1095-C with  the IRS. The filing deadlines for these forms remain unchanged: February 28, 2017, or March 31, 2017, if filing electronically. However, reporting entities may still file a Form 8809 for automatic or additional extensions of time related to these filing deadlines.

Extension of Good-Faith Transition Relief from Section 6721 and 6722 Penalties

For the 2015 reporting cycle, the IRS provided transition relief from reporting penalties for entities that could show good-faith efforts were made to comply with the information-reporting requirements. This relief was scheduled to expire this year, but the Notice extends the relief to the 2016 reporting and filing cycle, both for furnishing to individuals and for filing with the IRS. Just like in 2015, this relief applies to missing and inaccurate information required on the return, but no relief is provided for the failure to file an information return or furnish a statement by the applicable due dates.

Conclusion

Despite the filing extension and penalty relief granted in Notice 2016-70, the IRS nonetheless encourages employers and other coverage providers “to furnish statements as soon as they are able,” and the IRS does not anticipate extending this transition relief, for either the reporting deadlines or the good faith relief from penalties, for reporting for 2017.

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