Employers Not Prepared for ACA Tax Reporting

A new ADP study reveals employer and employee confusion about the first new major tax-filing forms that the U.S. government has introduced in more than 70 years.

Employers must provide Form 1094-C to the Internal Revenue Service (IRS) and Form 1095-C to employees. While employers with more than 50 full-time employees need to compile data for the new forms to demonstrate employee health care coverage offerings, two in five employers say they are unfamiliar with these forms altogether, according to the ADP Employer Confidence Report.

Even though the IRS has granted an extension of the due dates for filing these form, the ADP study found 32% of large enterprises (those with 1,000 employees or more) and 18% of mid-sized businesses (those with 50 to 999 employees) plan to file for an extension.

Eighty-three percent of mid-sized employers and 57% of large employers don’t think their employees clearly understand the forms or how they may be related to their 2015 tax filing obligations. In addition, only 20% of mid-sized businesses and 32% of large organizations have started communicating with their workforce about the new form and the implications it carries.

“Form 1095-C requires data from systems ranging from payroll, HR, leave of absence and benefits, well as specific codes based on each employee’s situation, to be completed accurately in compliance with the Affordable Care Act,” says ADP Senior Vice President/General Manager of Health Care Reform Vic Saliterman. “Many employers in our study indicated they plan to prepare their Forms 1095-C internally. Since their HR systems are often not linked this will most likely prove to be a significant challenge. Other employers are choosing to enlist an outside partner such as ADP for help.”

More than half of mid-sized businesses (52%) and 45% of large employers are unsure if they’re at risk of violating ACA compliance requirements this year, but nearly one in five employers think they are at risk of not complying with Form 1095-C requirements. 

A lack of preparation to manage these new forms can lead to a large volume of calls for assistance to HR departments, potential financial penalties and employees not submitting their 2015 taxes accurately, ADP notes.