Employers who must comply with the Affordable Care Act (ACA) are required to file Form 1094-C as part of their IRS reporting obligations. This form acts as a transmittal document for Form 1095-C, which provides details about the health insurance coverage offered to employees. Completing Form 1094-C correctly is essential for ensuring compliance with federal requirements and avoiding costly penalties. This guide explains the purpose of Form 1094-C, who must file it, key deadlines, and a step-by-step breakdown of how to complete it properly.
Understanding Form 1094-C and Its Importance
Form 1094-C serves as a summary report that employers must submit to the IRS to confirm that they offered minimum essential coverage to full-time employees. It helps the IRS determine whether an employer has met its obligations under the ACA’s Employer Shared Responsibility provisions. Employers must provide accurate information about the health plans they offered and the number of employees covered. If the IRS finds that an employer did not offer sufficient coverage, the business may face penalties.
Employers should understand that Form 1094-C is not distributed to employees. It is an internal filing document that must be submitted to the IRS along with copies of all Forms 1095-C issued to employees. These combined forms allow the IRS to verify whether an employer is complying with ACA regulations and whether employees have received offers of affordable health coverage.
Who Needs to File Form 1094-C?
Form 1094-C must be filed by all employers classified as Applicable Large Employers (ALEs). A business is considered an ALE if it had 50 or more full-time employees or full-time equivalent employees in the previous tax year. Even if an employer does not offer health coverage to its employees, it must still file Form 1094-C to report that no coverage was provided. Businesses that are part of a controlled or aggregated ALE group must also file Form 1094-C, indicating their group status and listing other related companies.
Deadlines for Filing Form 1094-C
Employers must file Form 1094-C with the IRS by specific deadlines each year. If filing by paper, the deadline is February 28. Employers who submit their forms electronically have until March 31. The IRS requires any employer submitting 250 or more Forms 1095-C to file electronically. Employers must also ensure that employees receive their copies of Form 1095-C by January 31. Missing these deadlines can result in late filing penalties, so businesses should begin gathering the required information well in advance.
Completing Form 1094-C: A Step-by-Step Guide
Filling out Form 1094-C requires careful attention to detail. The first section of the form, Part I, collects basic employer information, including the employer’s name, Employer Identification Number (EIN), address, and contact details. Employers must also indicate the total number of Form 1095-C documents they are submitting. It is critical to ensure that this information matches what is reported on Forms 1095-C, as discrepancies may lead to IRS inquiries.
In Part II of the form, employers must indicate whether they are part of a controlled or aggregated ALE group. If an employer is a member of a larger business group that shares common ownership, it must check the appropriate box and provide details in a later section. Employers who do not belong to such a group can leave this section blank. This part of the form also includes Line 22, where employers may claim specific certifications of eligibility for simplified ACA reporting methods.
Part III of Form 1094-C focuses on monthly employer information. Employers must report whether they offered minimum essential coverage each month of the tax year. They must also provide details about the number of full-time employees and total employees per month. Ensuring that this information is accurate is critical, as the IRS uses it to determine whether an employer met ACA compliance requirements.
Part IV applies only to businesses that are part of an aggregated ALE group. Employers in this category must list all related entities that share ownership and indicate whether they offered health coverage to employees. This section helps the IRS assess whether each entity within a controlled group met its ACA reporting obligations.
Common Mistakes to Avoid When Filing Form 1094-C
Errors on Form 1094-C can result in penalties or additional IRS scrutiny. One of the most common mistakes employers make is failing to file the form on time. Late submissions can trigger penalties, especially for employers that miss both the electronic and paper filing deadlines. Another frequent issue is incorrect employer identification details, which can delay IRS processing and cause compliance complications. Employers should also ensure they accurately report their full-time employee count, as an incorrect number can lead to IRS inquiries about compliance with the employer mandate.
Another mistake involves misclassifying an employer’s aggregated ALE group status. If a business is part of a controlled group but fails to indicate this on the form, the IRS may flag the submission for further review. Employers must also be careful when claiming any ACA reporting relief on Line 22. Incorrectly selecting a reporting relief option that does not apply to the employer can lead to further compliance issues. Reviewing the form thoroughly before submission can help prevent these errors and ensure smooth filing.
Penalties for Failing to File Form 1094-C
Employers who fail to file Form 1094-C or submit incorrect information may face significant IRS penalties. The penalty for failing to file the form on time is $310 per form. If an employer submits incorrect or incomplete data, additional penalties may apply. Businesses that deliberately ignore ACA reporting requirements may face higher fines, and the IRS may conduct audits to ensure compliance. Employers who anticipate missing the filing deadline can request an extension by submitting Form 8809 before the due date. This provides an automatic 30-day extension to complete and file the required documents.
Electronic Filing Requirements for Form 1094-C
Employers filing 250 or more Forms 1095-C must file Form 1094-C electronically through the IRS Affordable Care Act Information Returns (AIR) system. To do so, employers must register with the AIR system and obtain a Transmitter Control Code (TCC) before submission. Electronic filers must also use IRS-approved software or work with a third-party provider to ensure proper formatting and submission of the form. Failure to comply with the electronic filing requirement can result in penalties, so businesses with a large number of forms to submit should prepare in advance.
How Form 1094-C Affects Employer Shared Responsibility Penalties
One of the most important reasons for ensuring the accuracy of Form 1094-C is its role in determining whether an employer is subject to Employer Shared Responsibility Penalties under the ACA. The IRS uses this form to verify whether an Applicable Large Employer provided minimum essential coverage to at least 95% of its full-time employees. If an employer fails to meet this threshold, it may be subject to penalties under IRC Section 4980H(a) or 4980H(b).
The penalty under 4980H(a) applies when an employer does not offer coverage to enough full-time employees, resulting in a fine that can exceed thousands of dollars per employee per year. The penalty under 4980H(b) applies when the coverage offered is not affordable or does not meet minimum value standards, making the employer responsible for an additional fine per affected employee. Employers must ensure that the data reported on Form 1094-C accurately reflects their compliance status to avoid unnecessary penalties.
Understanding the IRS Review Process for Form 1094-C
Once an employer submits Form 1094-C to the IRS, it goes through a multi-step review process. First, the IRS checks the form for completeness, ensuring that all required fields are properly filled out. Any missing or inconsistent information may trigger a request for additional documentation or a correction notice. The IRS then compares the data on Form 1094-C with the Forms 1095-C submitted for employees to ensure that the reported figures match.
If discrepancies are found, the IRS may issue a Letter 226J to notify the employer of potential penalties. Employers have a limited window to respond to this notice and provide supporting documentation to contest any incorrect findings. Businesses that fail to respond in time may have to pay penalties even if they believe they met their ACA obligations. Keeping thorough records and filing an accurate Form 1094-C can help employers avoid IRS audits and reduce the risk of costly penalties.
How State-Level ACA Reporting Requirements May Affect Employers
While Form 1094-C is a federal requirement, some states have enacted their own ACA-related reporting obligations. States like California, Massachusetts, New Jersey, Rhode Island, and Vermont require employers to submit additional documentation to confirm that employees received qualifying health coverage. Employers operating in multiple states should verify whether they need to file separate reports at the state level in addition to Form 1094-C.
Employers who fail to comply with state-level ACA reporting requirements may face penalties similar to those imposed by the IRS. Some states require businesses to submit reports directly to state tax agencies, while others use the federal filings as a reference for enforcement. Employers should consult with tax professionals or state agencies to ensure full compliance with both federal and state ACA reporting rules.
How Employers Can Prepare for Future ACA Reporting Changes
As tax regulations evolve, employers must stay informed about changes to ACA reporting requirements that may affect how they complete Form 1094-C. In recent years, the IRS has adjusted deadlines, increased penalties for non-compliance, and expanded electronic filing requirements. Employers should regularly review IRS guidelines and work with tax professionals to ensure that they remain compliant with any updates to the ACA reporting process.
Future changes could include increased IRS scrutiny on affordability calculations, modifications to the Employer Shared Responsibility penalties, or updates to the electronic filing system. Employers should ensure they have robust payroll and HR systems in place to accurately track employee hours, coverage offers, and other critical data required for ACA reporting. Investing in compliance solutions now can help businesses avoid costly penalties and reduce the risk of IRS audits in the future.
Why Working with an ACA Compliance Expert Matters
Navigating the complexities of Form 1094-C and ACA compliance can be challenging for many employers, especially those with large workforces or multi-state operations. Partnering with an ACA compliance expert or tax professional can help businesses streamline the filing process and avoid common mistakes. Professionals who specialize in ACA reporting can review employer data for accuracy, assist with electronic filing requirements, and provide guidance on responding to IRS inquiries.
Employers who receive IRS penalty notices related to Form 1094-C can also benefit from working with compliance experts who can help dispute incorrect findings and provide the necessary documentation to support their case. Given the significant financial penalties associated with ACA non-compliance, investing in expert guidance is a proactive step that can protect businesses from unnecessary risks and fines.
Final Considerations for Filing Form 1094-C
Form 1094-C is a critical document for ACA compliance, and employers must take care to file it accurately and on time. Applicable Large Employers must submit this form along with Form 1095-C to provide the IRS with a complete picture of their health coverage offerings. Understanding the filing deadlines, completing each section correctly, and avoiding common mistakes can help employers stay compliant and prevent penalties.
Employers who need assistance with Form 1094-C, ACA compliance, or IRS reporting should seek guidance from experts in tax compliance. Working with professionals who understand the complexities of ACA reporting can help businesses avoid costly errors and ensure a smooth filing process. Get started today!