When information on the new Forms 1094/5-B and -C series, reporting employee health coverage, is incorrect, the IRS considers it a failure to file a correct return or furnish a correct statement to the employee (i.e., failure to file). The 2015 filings showed that this is especially true with employee or dependent individual Taxpayer Identification Numbers (TINs), or in other words, social security numbers. The IRS may waive penalties if the failure to file is due to reasonable cause and not due to willful neglect. You can meet the reasonable cause standard in regards to social security numbers by following the procedure outlined in the most recent proposed regulations released by the IRS. The procedure is summarized below.
To meet this standard, you need to ask the employee three specific times for their social security number and the social security numbers of any of their covered dependents.
The first request for social security numbers must be made at the time health insurance coverage begins. For ACA Form 1095-C purposes, the coverage is considered to begin:
- The date you receive a substantially complete application for health coverage or add a dependent to existing health coverage.
- If the coverage is retroactive, the date the determination of retroactive coverage is made.
Asking for the social security numbers on the application for coverage satisfies this first requirement.
If the insured employee fails to provide accurate social security information for themselves or their covered dependents upon enrolling in coverage, the next time you need to ask for updated social security numbers should be no later than 75 days after the coverage begins. For retroactive coverage, you must ask no later than the 75th day after the determination of retroactive coverage is made. This is referred by IRS as the first annual solicitation.
The last time you need to ask the insured employee for accurate social security numbers is by December 31 of the year following the year that coverage begins. This is referred to by IRS as the second annual solicitation.
The IRS does give you some relief for certain aspects of the process:
Existing coverage: If the employee was enrolled in coverage on any day before July 29, 2016, their coverage is considered beginning on July 29, 2016. The deadline dates should be determined using that date as the starting point (i.e., October 14, 2016 the first annual solicitation must be made).
Terminated employees: The process is deemed to be satisfied for the insured employee who terminated before September 17, 2015 (i.e., you can report using date of birth on the 2015 forms without further inquiries).
If you can prove that you followed these three steps, the IRS will consider you to have acted in a responsible manner to obtain the most accurate information in regards to the social security number of employees and dependents and penalties will be waived. It is recommended that if the correct social security number is obtained, that all prior Forms 1095 with the incorrect social security number be amended and new statements provided to the affected employee.
Note that the IRS is matching the names and social security numbers on Forms 1095-B and 1095-C to individual tax returns. It is important for employees to provide you with the same information for the Forms 1095, W-2, and 1099 as they are using on their Form 1040 individual tax return. If the information does not match, you will receive an error when filing the 1095 forms.
If you have questions, please contact our ACA team Bob Buss, Pam Branshaw, Tom Krieg, or your Wipfli relationship executive.