The Internal Revenue Service (“IRS”) has extended the due dates for employer information reporting under Code §6056 for 2015. The due date for furnishing Form 1095-C to employees is extended from February 1, 2016 to March 31, 2016, and the due date for filing the Form 1094-C transmittal and Forms 1095-C with the IRS is extended from February 29, 2016 to May 31, 2016, if filing on paper, and from March 31, 2016 to June 30, 2016, if filing electronically. This extension, provided by IRS Notice 2016-4, is welcome relief to employers, many of whom have been struggling to understand the reporting requirements and to gather the necessary data.
The notice reiterates prior guidance that the IRS will not impose penalties on employers that make a good faith effort to comply with the information reporting requirements; however, this relief is applicable only for incomplete or incorrect returns filed or statements furnished to employees. No relief is available for employers that fail to timely file an information return or furnish a statement. Employers are therefore encouraged to file the required returns and to furnish employee statements by the due dates, even though they might be partially incomplete or imperfect. Corrections can be made after the due dates. Meeting the deadlines is required in order to satisfy the good faith effort standard to avoid penalties.
For those employers who are unable to meet deadlines, all is not lost. The penalties may still be waived or abated if the failure to furnish or file a statement or return is due to reasonable cause. However, to qualify for the reasonable cause exception, the employer must demonstrate that it acted in a responsible manner and the failure is due to significant mitigating factors or events beyond the employer’s control. The IRS will take into account the following factors when determining whether to abate penalties for reasonable cause:
Whether the employer ultimately furnishes and files the required forms;
Whether the employer has made reasonable efforts to prepare for satisfying the reporting requirements, for example, gathering and transmitting the necessary data to an agent to prepare the data for submission; and
Whether the employer is taking steps to ensure that it will be able to comply with the reporting requirements for 2016.
The penalties that apply for a failure to furnish or file the required forms can be significant depending on the number of employees who are entitled to receive a Form 1095-C. The penalty is $250 for each failure to furnish a required Form 1095-C and $250 for each failure to file a Form 1095-C or Form 1094-C with the IRS.
Please contact us if you need assistance with the preparation of a reasonable cause statement.
© Boutwell Fay LLP 2016, All Rights Reserved. This handout is for information purposes only, and may constitute attorney advertising. It should not be construed as legal advice and does not create an attorney-client relationship. If you have questions or would like our advice with respect to any of this information, please contact us. The information contained in this article is effective as of January 31, 2016.