What are the Changes to Form 1095-C for the 2021 Tax Year?

What you need to know to start filing!

If your organization is required to comply with the Affordable Care Act (ACA) reporting requirements, you know that it is time to get started on your Forms 1095-C if you haven’t already. 

There are a few updates to Form 1095-C that all Applicable Large Employers (ALEs) and other mandated filers need to be aware of before completing their ACA reporting for the 2021 tax year. 

Here is an overview of information to help you get started. 

Updates to Form 1095-C for 2021

The main changes to Form 1095-C for the 2021 tax year are centered around Line 14, Offer of Coverage. Line 14 of Form 1095-C is where filers must enter a code from Series 1. These codes are used to describe the status of the offer of coverage that the employer made to their employees.

 For example, Code 1B is used to indicate that an offer of coverage was made to the employee but not their spouse or dependents. Last year, codes 1L-1S were added in response to the inclusion of ICHRAs. 

Now the IRS has added two more new codes, these are also in regards to ICHRA.

  • Code 1T represents the Individual coverage HRA offered to the employee and spouse (no dependents) and affordability was determined using the employee’s primary residence location ZIP code.
  • Code 1U represents the Individual coverage HRA offered to the employee and spouse (no dependents) and affordability was determined using the employee’s primary employment site ZIP code affordability safe harbor.

What is an ICHRA? 

An ICHRA is an Individual Coverage Health Reimbursement Arrangement. This is a type of HRA that employers can offer as an alternative to a traditional group health insurance plan. With an ICHRA, employers can provide reimbursements to their employees to use towards the costs of their monthly health insurance premiums and other costs.

With this type of plan, the employee chooses their own health insurance plan. The employer selects the amount which they will contribute to their employees, but they must use the IRS guidelines to ensure that this qualifies as “affordable” for each employee. 

There could be an Extension of the Recipient Copy Deadline

The IRS recently released a proposal. This IRS document proposes an automatic extension of no more than 30 days for ALE members and other mandated filers to furnish copies to their employees and recipients. 

This extension of 30 days would not only apply to the 2021 tax year but would become effective for future tax years as well. This means that every year businesses that are required to complete ACA reporting would have an additional 30 days to distribute copies of Forms 1095. 

Rather than the original January 31st deadline, employers would have until March 2. While this doesn’t change the ACA deadline, it would provide all organizations that must file with some extra time to complete Forms 1095

While this is potentially good news until the IRS finalizes this, businesses should plan to complete their Forms 1095 in time for the January 31 deadline.

There is a Possibility the E-filing Threshold could be Reduced

There is another IRS proposal that could affect your 2021 IRS filing requirements. 

The current e-file threshold for businesses is 250 forms. This number currently applies to individual tax forms, for example, you can e-file 249 1099 Forms and 249 W-2s with the IRS. 

According to this IRS Proposal, that will be changing. Going forward, the IRS would limit businesses to paper-filing a total of 250 forms during a tax year. 

This means that a business filing 249 1099 Forms and 249 W-2s, would file a total of 498 forms. Because this crosses the 250 thresholds, e-filing would be required for at least half of them.

It is still not clear whether or not this IRS proposal will be finalized and applied to 2021 tax returns filed in the 2022 calendar year, however, TaxBandits will continue to monitor the situation and provide updates. 

E-file your ACA Forms with TaxBandits

E-filing your ACA Forms with TaxBandits has so many benefits! Our e-filing process is easy and convenient. The IRS business rules are built-in to help you avoid many common errors that could result in an IRS rejection. 

TaxBandits also offers solutions for your recipient copies. You can mail copies to your recipients and/or grant them access to view and download their forms online. 
Ready to get started? Create your free TaxBandits account today to begin filing!

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