Does new report signal imminent IRS enforcement of ACA employer mandate?

The Treasury Inspector General for Tax Administration (TIGTA) was established to provide independent oversight of IRS activities.  Earlier this month, the TIGTA published an audit report regarding IRS efforts to implement the ACA’s Employer Shared Responsibility Mandate (Mandate).

The Mandate, very generally, requires Applicable Large Employers (ALEs) to offer affordable health insurance to full-time employees or risk paying penalties to the IRS.

Additionally, ALEs are required to annually file information returns with the IRS and furnish statements to full-time employees showing whether health insurance was offered and, if so, information about the health insurance offered.

Because the IRS has yet to start collecting penalties under the Mandate, some had questioned whether the IRS intended to enforce the Mandate.  However, the idea that the IRS will choose not to enforce the Mandate is likely misguided.  Here’s why.  The  report the TIGTA published this month reveals that despite delays and problems with the IRS’s development and implementation of key systems needed to identify noncompliant employers, the IRS is continuing to move forward with putting in place the pieces it needs to enforce the Mandate.

As an example, the report shows that the IRS began developing the ACA Compliance Validation (ACV) system in July 2015.  The IRS intends to use the ACV system to identify potentially noncompliant ALEs and calculate penalties.  Implementation of the ACV system was scheduled for January 2017 but has been delayed to May 2017.   Additionally, the report reveals that due to problems with the ACV system, the IRS has worked to develop additional automation tools in an attempt to identify ALEs subject to penalties and ALEs that have not filed information returns with the IRS.

The TIGTA’s press release related to the audit report indicates that the IRS will continue to require ALEs to file returns related to the Mandate.   “Information from the Forms 1094-C and 1095-C is needed by the IRS to verify the accuracy of reported health insurance offers of coverage and for calculating the Employer Shared Responsibility Payment. Thus, it is essential that this information is timely and accurately processed,” said J. Russell George, Treasury Inspector General for Tax Administration.

While it is possible that efforts to repeal the ACA may again move to the forefront, it would appear that as of the present time, the IRS intends to enforce the Mandate.  Therefore, employers should plan to continue complying with the ACA’s requirements for the foreseeable future.

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