IRS Releases 2017 Draft Instructions for Forms 1094-C and 1095-C

On Aug. 28, 2017, the IRS released a draft version of the instructions for Forms 1094-C and 1095-C, which are used by large employers to comply with Section 6056 reporting under the PPACA. The most notable change is that no Section 4980H transition relief is available beginning with the 2017 reporting year. Thus, all references to such relief have been removed. Specifically, boxes B and C on Line 22 of the Form 1094-C (which were previously used to claim transition relief) have now been marked as “reserved.” Similarly, column (e) of Part III of the Form 1094-C has also been marked “reserved.”

In Part II of the Form 1095-C, it was anticipated that the “Plan Start Month” box would be mandatory for 2017. In this draft version, the box remains optional for 2017.

The IRS provides clarification that there is no specific code, relative to Line 16 on the Form 1095-C, for an employee who waives an offer of coverage. This is consistent with the previous interpretation, which generally instructed that the line either be left blank or completed with an affordability safe harbor code, as applicable.

There is an additional remark in the section regarding corrected returns that may cause confusion for employers. It states that an incorrect entry of the employee’s cost of coverage on Line 15 would not necessitate a corrected filing if the entry differs from the correct amount by $100 or less. This safe harbor is based on guidance provided in IRS Notice 2017-9 for certain de minimis errors. It is unclear as to whether the $100 is based on the monthly or annual amount. When you consider the purpose of Line 15 -to aid in the determination of whether the employee’s cost of coverage is affordable-, it is unlikely that an error in the amount reported of up to $100 annually would affect the affordability calculation in many cases. Thus, if an employer reports an incorrect cost of coverage on Line 15, the reported amount differs from the correct amount by $100 or less annually and the mistake does not impact the affordability calculation, the employer may not be required to file a corrected form. Nevertheless, if the employee requests a corrected form, one must be provided by the employer.

The deadline for furnishing the completed Form 1095-C to employees will be Jan. 31, 2018. The deadline for filing the Forms 1094-C and 1095-C electronically with the IRS will be April 2, 2018 -March 31, 2018 falls on a Saturday. The deadline for filing paper forms with the IRS will be Feb. 28, 2018. Those filing by paper are reminded that the forms must be printed in landscape format.

Importantly, the draft instructions provide no relief from penalties for a good faith compliance effort. This is similar to the 2016 version of the instructions. However, the IRS later provided such relief through communication on their website in regards to the 2016 reporting year. They could provide a similar communication closer to the 2017 filing deadlines.

We’ll keep you updated of any developments, including release of the finalized forms and instructions.

Draft Instructions, Forms 1094-C and 1095-C »