In late December 2015, the Internal Revenue Service (IRS) extended the due dates for filing Forms 1094/1095-B and 1094/1095-C. Statements to employees are now due March 31, 2016 and reporting to the IRS is due May 31, 2016, if filing paper forms, or June 30, 2016, if filing electronically. With the deadlines approaching, some employers may be wondering – what if we don’t meet these deadlines?
Employers who do not comply with the extended due dates are subject to penalties under Internal Revenue Code sections 6721 and 6722 for failure to timely file and furnish statements. The penalty per return is $250 up to a maximum of $3 million but may be reduced to $50 or $100 if the returns are corrected within certain time periods. The penalty is increased to $500 per return, however, for intentional failures and there is no maximum limit on the penalty that may be assessed.
For the reporting due in 2016, the IRS will not impose penalties under sections 6721 and 6722 if employers can show they made good faith efforts to comply with the requirements. But this relief applies only to incorrect or incomplete information provided on the return or statement. It does not apply if an employer cannot show it made a good faith effort or if it fails to timely file a return or statement.
However, employers who file late may still get some relief at the discretion of the IRS. Factors the IRS will consider include whether reasonable efforts were made to prepare for reporting, such as gathering and transmitting data to a vendor or testing whether information could be electronically transmitted to the IRS. The IRS will also consider the extent to which an employer is taking steps to ensure it will be able to comply next year.
The IRS knows the reporting is complex and that employers will likely make mistakes but they do expect employers to, at least, try to get it right. The bottom line for this first reporting – do your best and make a reasonable, good faith effort. And start thinking about steps to take in the upcoming months that will make the process smoother for the next reporting in early 2017.