What You Need to Know About the IRS’s New ACA Penalty Changes

IRS penalties are subject to change from year to year. Read this blog to learn about the changes made for 2023!

Things you should know about the IRS's new ACA penalty changes

As you may know, the IRS will impose penalties for a variety of reasons. The two most common reasons for IRS ACA 1095 penalties are filing a form past the deadline and filing a return with missing or incomplete information. 

Penalties can vary from year to year, and 2022 is no exception. The IRS has made a few small changes to its penalty policies for this filing season. Keep reading for an overview of what’s changed and how to address it in your forms.

New penalties in 2023

Under the ACA’s Employer Mandate, employers with 50 or more full-time employees and full-time equivalent employees, or Applicable Large Employers (ALEs) must

  • Offer Minimum Essential Coverage (MEC) to at least 95% of their full-time employees and their dependents where the coverage meets Minimum Value
  • Ensure that the coverage for the full-time employee is affordable 

Failing to meet these requirements can result in facing IRS penalties. Please note that only the IRS can levy penalties against businesses and taxpayers. The penalties included in this blog are based on information provided by the IRS.

Penalty Amounts

The 2023 4980H(a) penalty is $240 per employee. You may face a 4980H(a) penalty if

  • An employer doesn’t offer Minimum Essential Coverage to at least 95% of its full-time employees for any month during the tax year 
  • At least one full-time employee receives a Premium Tax Credit for purchasing coverage through a state or federal ACA avenue

The 2023 4980H(b) penalty is $360 a month per employee. The IRS issues a 4980H(b) on a per-employee basis, for every employee that does not obtain appropriate coverage.

The IRS will issue a 4980H(b) penalty when an employer offers its full-time employees coverage that was not affordable or not minimum value and had at least one employee receive a PTC from state or federal health exchange.

Penalties are added on a monthly basis for every full-time employee that:

  • Did not receive an offer of coverage or
  • Received an unaffordable offer or not minimum value
  • And the employee received a PTC for that month

Employers cannot face both 4980(a) and 4980(b) penalties for the same tax year. If an organization fails to meet both requirements, the higher penalty of the two will be given.

Failure to file and furnish penalties

As stated above, the IRS will also assign penalties for filing late or incorrect information. 

For the 2023 tax year, the IRS ACA penalty for failing to file 1095-C forms is $290 per return if filed after August 1, 2023. The penalty increases to $580 if the employer continues to avoid filing after that date.

The penalty for incorrect Form 1095-C payee statements will be $290 per return, and the amount doubles if the employer continues to avoid filing.

Filing with TaxBandits

TaxBandits can simplify your ACA filing requirements so you don’t have to worry about penalties. Just create a free TaxBandits account to get started. You can take advantage of our helpful resources on our website, blog, or Youtube channel. 

TaxBandits offers multiple features that simplify the 1095 filing experience. We can handle all of your postal mailings, and we provide online access to tax forms at you and your recipients’ convenience. Our built-in audit check will check your form for common errors and notify you before you transmit it to the IRS.

Don’t risk facing penalties, get started today at TaxBandits.com!

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