On November 18, 2016, the Internal Revenue Service (IRS) issued Notice 2016-70 which provides a limited extension of time for employers to provide 2016 Forms 1095-C to individuals. It also extends good-faith transition relief from certain penalties for the 2016 reporting year.
Q 1: What was extended?
A 1: 2016 Forms 1095-C statements must be furnished to individuals by March 2, 2017 (rather than January 31, 2017).
This extension of time also applies to carriers providing Forms 1095-B to individuals in insured plans.
Q 2: Were the deadlines for reporting to the IRS extended?
A 2: No.
The 2016 Form 1094-C and all supporting Forms 1095-C (collectively, “the return”) is due to the IRS by March 31, 2017 if filing electronically (or February 28, 2017 if filing by paper). These deadlines were not extended as part of the relief announced in Notice 2016-70. Per the Notice, the government determined there was no similar need for additional time for employers to file these Forms with the IRS.
As a reminder, employers that file at least 250 Forms 1095-C must file electronically. The IRS encourages all filers to submit returns electronically.
Q 3: Is there penalty relief?
A 3: Yes
Notice 2016-70 extends transition relief from penalties to reporting entities that have made good-faith efforts* to comply with the information reporting requirements for the 2016 reporting year, both for furnishing the Form 1095-C to individuals and for filing with the IRS. Specifically, this relief applies to missing or inaccurate taxpayer identification numbers and dates of birth, as well as other information required on the return or statement.
No relief is available if the reporting entity does not make a good-faith effort to comply with the regulations or for a failure to file a return or furnish a statement by the applicable due dates.
This relief does not absolve an employer from correcting an incorrect Form if so instructed by the IRS.
Q 4: What if the submissions are late?
A 4: Employers that do not comply with these due dates are subject to penalties. However, employers should still furnish and file the forms and the IRS will take such furnishing and filing into consideration when determining whether to abate penalties.
Q 5: What if employees do not have Forms 1095-C (or Forms 1095-B from the carrier) before they file their tax returns?
A 5: Some taxpayers may not receive their Form 1095-C (or 1095-B from the carrier) by the time they are ready to file their personal tax return for 2016. Taxpayers do not need to wait until they receive their Form 1095-C (or 1095-B) to file their annual tax return, and may rely on other information from their employer (or carrier) for purpose of filing individual taxes. Individuals need not send this information to the IRS when filing their returns but should keep it with their tax records.
Q 6: Will the IRS offer this relief for 2017 reporting?
A 6: According to the Notice, the IRS does not anticipate extending this transition relief, either with respect to the due date for furnishing the Form 1095-C to individuals and good-faith relief from certain penalties, to reporting in 2017.
For the Notice, visit: https://www.irs.gov/pub/irs-drop/n-16-70.pdf.
This summary is intended to convey general information and is not an exhaustive analysis. This information is subject to change as guidance develops. USI does not provide legal or tax advice. For advice specific to your situation, please consult an attorney or other professional.
These materials are produced by USI Insurance Services for educational purposes only. Certain information contained in these materials is considered proprietary information created by USI. Such information shall not be used in any way, directly or indirectly, detrimental to USI and/or their affiliates.
Neither USI nor any of its respective representatives or advisors has made or makes any representation or warranty, expressed or implied, as to the accuracy or completeness of these materials. Neither USI nor their respective representatives or advisors shall have any liability resulting from the use of these materials or any errors or omission therein. These materials provide general information for the use of our clients, potential clients, or that of our clients’ legal and tax advisors.
IRS Circular 230 Disclosure: USI Insurance Services and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with USI of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.
© 2016 USI Insurance Services. All Rights Reserved.
* When determining “good-faith”, the IRS will take into account whether an employer made reasonable efforts to prepare the reporting, such as gathering and transmitting the necessary data to prepare the information or testing its ability to transmit the information to the IRS. Additionally, the IRS will look at whether the employer is taking steps to ensure compliance in for CY 2017.