IRS Beginning to Send Affordable Care Act Notices to Religious Organizations

Dickinson Wright

Dickinson Wright

According to statements made by the acting director of exempt organizations at the IRS, churches and other religious organizations will soon start to receive questions from the IRS about potential liabilities under the Affordable Care Act.

Over the last few years, the IRS has sent letters to employers that it suspects have failed to comply with the Affordable Care Act’s reporting requirements. Those requirements provide that all employers who average 50 or more full-time employees/full-time equivalent employees during the previous calendar year (known as “Applicable Large Employers” or “ALEs”) must prepare and mail Forms 1095-C for each full-time employee, along with Form 1094-C, a transmittal Form that helps to indicate whether an employer may be subject to a penalty for failure to offer sufficient health care coverage under ACA’s employer shared responsibility rules.

It appears that the IRS is cross-referencing the number of W-2s each employer has filed to determine whether the employer is an ALE, and thus may have failed to file the correct Affordable Care Act returns. Penalties for failing to file and furnish returns to employees can be as much as $540 per return.

According to Margaret Von Linen, Director of Exempt Organizations, the IRS has begun targeting churches and other religious organizations as part of a compliance program that will run through August 2019. She made these statements at the TEGE Exempt Organizations Council meeting on June 28, 2019.

Employers that receive letters inquiring as to whether they are ALEs should reach out to an experienced employee benefits practitioner to determine whether or not they are an ALE. If they are an ALE, a benefits attorney can help craft an explanation as to why a filing was not made timely.

Additionally, employers of all types with 50 or more full-time/full-time equivalent employees that have not filed their 2015, 2016, 2017, or 2018 Affordable Care Act Forms with the IRS, should consider doing so as soon as possible, to minimize potential penalties.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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