The Internal Revenue Service did away with good-faith transition relief earlier this year, which allowed the agency to waive Affordable Care Act (ACA) reporting requirements for businesses that missed mandatory reporting requirements.

That means it's more important than ever for business owners to provide the right reports and health plans to employees, so they can avoid costly Employee Shared Responsibility penaltiesFS blog (3).png

Employers who enter incomplete or incorrect information on IRS Forms 1094-C or 1095-C (used for health insurance) could now find themselves owing up to $4,120 per employee come tax season.

Whether you’re a new business or a seasoned filer, you’ll want to ensure you’re covering all your bases when it comes to ACA reporting. What does that entail?

4 Tips to Avoid ACA Reporting Fines

1. Determine if you’re required to report

According to the Employer Shared Responsibility (ESR) provisions in the ACA, a business with 50 or more full-time (or full-time equivalent) employees must report on their health insurance offerings. This number is an average, so even if you just start the year with 55 employees and end it with 45, you’re still required to file.

While this may seem simple enough, size isn't the only determining factor when it comes to reporting. If your company sponsors self-insured health coverage at all, you have reporting responsibilities under the ACA.

If you’re not sure about your ACA reporting status, visit the IRS’s page on determining eligibility.

2. Ensure your coverage plan meets the affordability threshold

If you’ve determined that you’re responsible for ACA reporting, you’ll need to look at the coverage you offer employees to ensure it’s considered affordable.

The IRS determines your plan is “affordable” if the lowest-cost, self-only coverage option an employer offers does not exceed a given percentage of an employee’s income. For the 2022 tax season, it’s 9.61%.

Determining an employee’s income can be difficult, which is why employers can use the following safe harbors:

  • Employees’ W-2 wages from that tax year
  • Employees’ rate of pay
  • The individual federal poverty level

3. Make sure plans meet the minimum value (MV) threshold

While your coverage provider should be aware of the minimum value threshold and offer only health insurance plans that meet it, it’s always good to double-check.

The ACA requires that the plans you offer must cover at least 60% of the total cost of medical benefits. While the affordability threshold changes year-to-year, the (MV) threshold is considered fixed.

4. Provide the proper ACA reporting forms

When tax season rolls around, make sure you’re including ACA reporting in your preparations. Remember: You can be completely ACA compliant but still be fined for not following reporting procedures. What two forms do you need to keep in mind?


First, you will need to provide all your full-time employees with a copy of Form 1095-C. You have to do this even for employees not enrolled in the company-sponsored health plan. You'll also need to keep a copy of every employee’s form to send to the IRS.


Employers must also complete Form 1094-C. This does not need to be given to employees, as it serves as a reporting summary. This form includes:

  • Employer Identification Number (EIN)
  • Contact information
  • Primary contact person
  • Total number of employees

For more in-depth instructions on these forms, visit the IRS’s ACA guidelines page.

While the thought of coordinating ACA reporting can feel overwhelming, remember you don't have to manage it on your own! Our experienced team stays updated on the latest changes to ACA regulations, so you don't have to. Reach out today and ask about the different ACA packages we offer!

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