Corrected Returns – When an Employer Needs to File a Corrected Form 1095-C

The deadline to timely file the Form 1094-C and Form 1095-C electronically was June 30, 2016.   However, the IRS recently stated that an employer who has a transmission or submission rejected by the Affordable Care Act Information Returns system (AIR system) has an additional 60 days from the rejection date to submit a replacement Form and have the rejected Form treated as timely filed.  Additionally, an employer who timely filed may still have to file additional Form 1095-Cs through the IRS’ corrections procedures.  If any of an employer’s Form 1095-Cs are “accepted with errors”, the employer is expected to file a corrected return.

An employer is responsible for filing a corrected Form 1095-C if there was an error in the name, the taxpayer identification number (TIN), the employer EIN, line 14, 15, or 16, or Part III related to covered individuals.  The source of the error identification may be an IRS error message when submitting the Form 1095-C, the employer recognizing the error through an internal process, or the employee after receiving the Form 1095-C.  Regardless of the source of the identification of the error, the employer must take the following steps to correct the Form 1095-C.  First, the employer should prepare a new Form 1095-C for the employee and check the “CORRECTED” box on the top right hand corner of the Form 1095-C.  Next, the employer should complete a non-authoritative Form 1094-C to submit with the corrected Form 1095-C.  An employer should not check the “CORRECTED” box on the top right corner of the Form 1094-C.  Finally, the employer should furnish a corrected Form 1095-C to the employee.

The process for filing a corrected Form 1095-C is not all that complicated.  However, there are plenty of unanswered questions.  For instance, what are the employer’s obligations if it follows the solicitation procedures after receiving an “accepted with errors” message for an incorrect TIN and the solicitation provides a TIN that is obviously incorrect.  For example, many of the incorrect TINs submitted to employers are obviously incorrect with repeating numbers (555-55-5555) or descending numbers (987-65-4321).  If this is the new “correct” TIN the solicitation produces, does the employer really have a responsibility to file a corrected Form 1095-C with the IRS and send a statement to the employee who provided the new “correct” TIN?  We would argue this is a waste of everyone’s time, money, and effort.  We understand the importance of providing the correct TIN to the IRS, but the reality is the solicitation process is unlikely to lead to many more accurate TINs.  Additional IRS guidance would be welcomed.

Furthermore, an employer is unlikely to know if its line 14, 15, and 16 code combinations are impossible if its software provider is not telling the employer of that fact.  The software provider whom we work with closely had software in place that did not allow clients to submit impossible code combinations.  However, if an internal process was not in place, it may have been possible for an employer to submit a Form 1095-C with impossible code combinations and not receive an “accepted with errors” message.  How the government judges “good faith efforts” in this scenario is a mystery.  Too often with the Form 1095-C, the blind are leading the blind which is going to create a huge mess for the IRS.  To ensure compliance, it is a good idea for an employer to have somebody review a random sampling of the employer’s collection of Form 1095-Cs to check for accuracy.

Regardless of the reason, an employer should try to correct any return that is “accepted with errors.”  Correcting errors is a requirement to use the good faith efforts standard to file accurate and complete information returns.  Consequently, it is an essential step to 2015 ACA compliance.

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