Understanding IRS Letter 1865-C: Correcting Your ACA Reporting Forms
When filing information returns like Forms 1095, 1098, or 1099, the IRS may deem your submission unprocessable. In such cases, the IRS issues Letter 1865-C, notifying you that your return is incomplete or rejected. This blog explains how to handle IRS Letter 1865-C, why it is issued, and best practices to avoid future issues.
This blog will explore IRS Letter 1865-C, why you may have received it, and how to correct your ACA reporting forms to avoid penalties.
First, let’s start with the basics.
What is Form 1865-C?
When filing information returns such as Forms 1095, 1098, 1099, or others, you may encounter a situation where the IRS deems your submission unprocessable. In such cases, the IRS issues Letter 1865-C (Information Return (Paper) Incomplete or Rejected for Processing), notifying you that your information return is incomplete or rejected for processing.
Why do you Receive Form 1865-C?
Based on information from the IRS website, if the IRS receives an ACA reporting document that it cannot process, it will send a Form 1865-C. This could happen for a variety of reasons, for example:
- A typo in your company’s name or EIN
- Masked SSN or EINs
- A misprint on the form where information does not appear in the proper box
- Even if the font is too small
Unfortunately, IRS Letter 1865C does not adequately describe the issue. You typically have only 30 days to respond to the IRS letter 1865-C and correct the issues.
Steps to Correct ACA Reporting Forms After Receiving IRS Letter 1865C
Correcting the errors noted in IRS Letter 1865C is crucial to avoid potential penalties. Here’s how you should proceed:
- Review the Letter Carefully
- The first step is to review IRS Letter 1865-C thoroughly. It will specify the errors and the forms that need correction. Pay close attention to the deadlines provided for submitting the corrected forms.
- Identify the Errors
- Cross-check the information in your original ACA filings with the details in the letter. Identify the specific discrepancies highlighted by the IRS, such as incorrect employee SSNs, inaccurate coverage details, or mismatches with IRS records.
- Correct the Errors on the Relevant Forms
- After identifying the errors, you must correct them on the appropriate ACA forms. This could involve updating Form 1095-B, Form 1095-C and their transmittal form 1094-B & 1094-C. Ensure that all corrected information is accurate and matches the IRS’s requirements.
- Resubmit the Corrected Forms
- Once the errors have been corrected, resubmit the amended forms to the IRS. If filing electronically, use the ACA Information Returns (AIR) system. If filing by paper, follow the IRS guidelines for corrected form submission.
- Keep Records of Corrections
- Maintain a record of all corrections and correspondence related to Letter 1865-C with the IRS. This documentation is crucial for your records, and in case further inquiries arise.
- Respond to the IRS in a Timely Manner
- Ensure that you adhere to any deadlines provided in IRS Letter 1865-C. Timely corrections help avoid potential penalties and further IRS scrutiny.
Best Practices to Avoid Receiving IRS Letter 1865-C
To avoid receiving IRS Letter 1865-C, which indicates that your information returns were incomplete or unprocessable, follow these best practices:
1. Ensure Accurate and Complete Data: Double-check all information on your forms before submission. Each form should contain accurate details, such as names, Social Security Numbers (SSNs), Taxpayer Identification Numbers (TINs), and addresses.
2. Use IRS-Approved Formats: Submit your information returns in the correct format, as specified by the IRS. For electronic filers, this means adhering to the guidelines of the ACA system. For paper filers, ensure your forms are filled out legibly and without errors.
3. Timely Filing: Submit your forms by the IRS deadlines to avoid issues that may arise from late filings, which could lead to errors in data processing.
4. Validate Information Before Submission: Use validation tools or software to verify the accuracy of data on your forms before submitting them to the IRS. Many e-filing platforms provide real-time checks to catch common errors.
5. Properly Match Data: Ensure that the information reported on your Forms 1094, 1095, 1098, and 1099 matches IRS records. This includes confirming that TINs, SSNs, and other identifiers are correct and up-to-date.
6. Follow IRS Instructions Closely: Adhere strictly to the IRS instructions for each form. Misinterpretation of instructions can lead to incorrect filings, resulting in the issuance of Letter 1865-C.
7. Stay Updated on IRS Requirements: Regularly check for updates or changes in IRS filing requirements. New regulations or form changes can affect how you need to report information.
8. Maintain Proper Documentation: Keep detailed records of all submissions, corrections, and communications with the IRS. Good documentation can help quickly address any issues that might arise.
Conclusion
IRS Letter 1865C is a serious notice that requires immediate attention. As an employer, it’s your responsibility to ensure that your ACA reporting is accurate and complete. By promptly correcting the errors outlined in the letter, you can avoid penalties and ensure compliance with the ACA reporting requirements.
Submitting ACA forms via paper filing is prone to mistakes and errors. E-filing forms take the guesswork out of tax submissions. The IRS highly recommends e-filing and offers many advantages over traditional paper filing, including faster and more effective submission and processing times.
When using an IRS-authorized software provider like TaxBandits, extensive data validation typically confirms that your data is ready to file. This is something you can’t get with paper filing. E-file Form 1095-C and file 1095-B with TaxBandits.
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