Employer Considerations: ACA Individual Shared Responsibility Provisions and the 2014 Tax Return Season
Written by Jason Rothman
Individuals are in the process of having their 2014 tax returns prepared and they (and their tax professionals) are now dealing with something new -- the reporting of the Affordable Care Act (“ACA”) individual shared responsibility provision under Internal Revenue Code (“IRC”) Section 5000A. In response to the tax practitioner community concerns about what documentation is needed to support compliance with the ACA individual shared responsibility provision under IRC Section 5000A, the IRS issued “Return Preparer Best Practices” (initially issued December, 2014 and later revised early February, 2015 (IRS Document)). This guidance specifically advises what issues must be resolved to properly report compliance with IRC Section 5000A.
Should employers care about this since the ACA employer mandate didn’t officially come into effect until 2015? The answer is a resounding yes. The Best Practices, while specifically noting that a tax return preparer does not have a new due diligence requirement arising under the ACA, does list the documentation the tax preparer may rely on in addressing whether the individual had qualifying health coverage for a tax year. Such documents include IRS Form 1095, IRS Form W-2, and other documents that may substantiate coverage (for example, medical bills showing payments by a health insurance provider and/or documentation of coverage from an employer). Notwithstanding this discussion, the Best Practices go on to tell the tax practitioners “while employers may be able to assist their employees in documenting their coverage, you should not routinely or automatically advise your clients to seek documentation from their employer.” Further, the Best Practices states “employers are not required to provide this documentation for the 2014 tax year.”
Regardless of not being required to provide any coverage information, employers may want to consider taking a couple proactive steps as it relates to their employees’ 2014 tax returns. First, an employer may want to specifically communicate to its employees that it is not required to issue any documentation regarding employee coverage under its health plan (or lack thereof). Second, as a courtesy, the employer could make available IRS Publication 5187 (“Health Care Law: What’s New for Individuals & Families” (IRS Document) which provides guidance on the individual shared responsibility provision under IRC 5000A, including its reporting requirements.