IRS Employer Mandate Penalties Coming Soon

The first two years of the Affordable Care Act’s (ACA) Employer Mandate and corresponding IRS reporting has passed (2015 and 2016). However, the IRS has yet to impose any penalties on employers for failure to comply.

Earlier this month the Treasury Inspector General for Tax Administration (TIGTA) issued a report addressing the status of their enforcement efforts: Affordable Care Act: Assessment of Efforts to Implement the Employer Shared Responsibility Provision.

In this report, TIGTA explains that implementation of the ACA Compliance Validation (ACV) system, which will be used to identify noncompliance and calculate penalties, has been delayed to May 2017. In addition, due to challenges with the ACV system, the IRS is developing additional automation tools to identify nonfilers and applicable large employers subject to coverage related penalties.

TIGTA’s report explains that these systems will go into effect sometime after May 2017. Once the systems are in place, the IRS will be able to bulk identify noncompliant employers. This will allow the IRS to send en masse notices to noncompliant employers for all reporting years.

What This Means for Employers
The current lack of IRS notices for noncompliance with the employer mandate does not imply that the IRS does not intend to enforce the employer mandate. This also marks the onset of the IRS ACA audit process for 2015 compliance and reporting. The audit process for 2016 reporting may also be getting underway this year.