IRS Affordable Care Act Audits
Experienced Legal Counsel for Employers Facing ACA Related Audits from the IRS
While the ACA is designed to help workers gain access to health insurance, the law’s requirements create significant burdens for employers. Recordkeeping and reporting obligations can be complex and costly, and noncompliance can expose employers to penalties even when they otherwise satisfy the employer mandate for providing coverage. As a result, IRS ACA audits present meaningful risks, and employers who receive notice of an audit must work with experienced counsel to protect their interests. Companies managing additional IRS issues sometimes review general background about our practice before reaching out.
New York Lawyers Representing Employers in IRS ACA Audits
At Thorn Law Group, we have extensive experience representing employers during IRS audits involving ACA reporting and compliance. If your company is facing an ACA review in New York, our lawyers can help ensure that you are prepared and can help you proactively address any documentation or reporting concerns. A proactive approach demonstrates good faith and can reduce liability exposure when errors occurred in past filings.
Even employers that meet the ACA’s employer mandate may still need to demonstrate compliance with reporting obligations to avoid penalties. IRS audits tend to be thorough, and agents frequently assume noncompliance until documentation proves otherwise. Employers sometimes examine broader IRS audit procedures to understand how these reviews typically proceed.
ACA Compliance Requirements: Forms 1094-C, 1095-C and Employer Shared Responsibility Rules
Applicable large employers must file Forms 1094 C and 1095 C each year to report health coverage information to the IRS. These forms also help the IRS evaluate compliance with Employer Shared Responsibility rules under IRC Section 4980H. Failure to submit accurate and timely forms can lead to civil penalties, and late or incorrect forms often trigger deeper scrutiny. Maintaining accurate employee data, coverage dates and affordability calculations is essential to showing compliance.
Common Issues in IRS Affordable Care Act Audits
IRS audits under the Affordable Care Act (ACA) can involve a wide range of issues. For employers targeted in these audits, it is critical to have a clear and comprehensive understanding of the specific issues involved.
If your company is facing an IRS ACA audit, an experienced New York IRS Affordable Care Act lawyer at Thorn Law Group can assess the risks your company is facing and then work with the IRS to secure a favorable resolution on your company’s behalf. We handle IRS audits involving all potential ACA-related liability risks, including common issues such as:
Determining “Applicable Large Employer” Status
“Applicable large employers,” or “ALEs,” are subject to the employer shared responsibility provisions of the Affordable Care Act. As the IRS explains, “[w]hether an employer is an ALE in a particular calendar year depends on the size of the employer’s workforce in the preceding calendar year.”
As a result, many employers must assess their tax-related compliance obligations under the ACA on an annual basis. If the IRS disputes an employer’s assessment of its compliance obligations, this can lead to a high-risk audit.
Determining Full-Time Employee Status
Calculating the size of a company’s workforce for purposes of determining whether the company qualifies as an ALE involves assessing its number of full-time (and full-time equivalent) employees. As a result, if the IRS disagrees with a company’s assessment of its employees’ status (as either full-time or full-time equivalent), this can lead to a high-risk audit as well.
Assessing Medical Coverage Affordability and Minimum Value
As the IRS also explains, when a company qualifies as an ALE, it must either, “offer minimum essential coverage that is ‘affordable’ and that provides ‘minimum value’ to their full-time employees (and their dependents), or potentially make an employer shared responsibility payment to the IRS.” The terms “affordable” and “minimum value” both have defined meanings under the ACA. If the IRS disagrees with a company’s determination of affordability or minimum value, this is yet another issue that can potentially create significant liability exposure.
Calculating Employer Shared Responsibility Payments (ESRPs)
When making employer shared responsibility payments (ESRPs) in lieu of providing affordable coverage that provides minimum value, companies must carefully calculate these payments in strict compliance with the ACA. However, due to the ACA’s complexities and ambiguities, this is often easier said than done.
The IRS routinely scrutinizes companies’ calculations of ESRPs, and if companies cannot substantiate their calculations, they can face substantial penalties. If your company is facing scrutiny related to its ESRPs, we strongly encourage you to speak with a New York IRS Affordable Care Act lawyer at our firm right away.
Recordkeeping and Filing Compliance (Including Form 1094-C and 1095-C Compliance)
Employers that are subject to the ACA must maintain comprehensive records documenting their compliance with the law. They must also timely file IRS Forms 1094-C and 1095-C on an annual basis. Recordkeeping and filing compliance are common issues in IRS ACA audits as well, and companies that cannot affirmatively demonstrate compliance can face penalties that they could—and should—have avoided. We have extensive experience helping companies of all sizes demonstrate compliance with the IRS in ACA and other matters.
Again, these are just examples. IRS audits under the Affordable Care Act can involve a wide range of other issues as well. We represent New York employers in all types of ACA audits, and we rely on our experience to target favorable resolutions on behalf of our clients as efficiently as possible.
How a New York IRS Affordable Care Act Lawyer at Thorn Law Group Can Help
When we represent companies during IRS ACA audits, we take a comprehensive approach focused on ensuring that our clients do not incur any unnecessary liability. When desired, we provide assistance with mitigating our clients’ ACA-related risk going forward as well.
Our services for companies that are facing IRS ACA audits in New York include:
Conducting an Internal ACA Compliance Assessment
If your company is facing an IRS audit under the Affordable Care Act, our team can work quickly to assess your company’s compliance with the statute’s requirements and then advise you regarding the risks your company is facing in the audit. Understanding the risks involved in an IRS audit is a necessary first step toward building and executing a sound defense strategy.
Responding to (and Defending Against) the IRS’ ACA Audit
Once we have a clear understanding of the risks your company is facing, we will then shift focus to responding to (and defending against) the IRS’ audit. In a typical scenario, this will involve:
- Developing a response strategy based on the findings of our internal ACA compliance assessment
- Compiling relevant internal records and ensuring protection of the attorney-client privilege
- Drafting a written response to the IRS and submitting appropriate supporting documentation
- Providing direct representation in pre-assessment communications with IRS personnel
- Challenging flawed assumptions, flawed methodologies and other issues during the audit process
Our lawyers communicate directly with the IRS on behalf of our clients throughout the audit process, keeping them updated and informed every step of the way. If new or unanticipated issues arise, we work with our clients to address these issues promptly before they present bigger risks than necessary.
Pursuing Appeals and Other Post-Audit Challenges as Necessary
Along with representing companies during IRS ACA audits, we also pursue appeals and other post-audit challenges as necessary. If your company is facing liability as a result of an IRS audit under the Affordable Care Act, our team can walk you through the options you have available.
Pursuing a Settlement with the IRS When Warranted
While we fight to help our clients avoid liability whenever possible, we also represent our clients in settlement negotiations with the IRS when warranted. If it is in your company’s best interests to settle, our team can work to secure a favorable settlement on your company’s behalf.
Managing ACA Compliance Going Forward (Including Form 1094-C and 1095-C Compliance)
Companies that have faced ACA-related scrutiny in the past are more likely to face additional scrutiny from the IRS in the future. This makes it essential to effectively manage ACA compliance going forward. If desired, once your company’s audit is complete, we can provide assistance with developing and implementing a comprehensive ACA compliance program.
Understanding the Risks of an IRS ACA Audit
The IRS has the authority to impose civil penalties for several types of ACA related noncompliance. Depending on the facts involved, an ACA audit can result in multiple penalties that apply on a per employee basis, which can escalate total liability quickly.
Potential penalties resulting from ACA audits include:
- Section 4980(H)(a) penalties at $247.50 per month per employee for 2024.
- Section 4980(H)(b) penalties at $372 per month per employee for 2024.
- Failure to File penalties of $310 or $630 per information return as of 2024.
- Failure to Furnish penalties of $310 or $630 per 1095 C statement as of 2024.
Some employers also face overlapping ACA, ERC or PPP review issues, and they may benefit from related compliance considerations when preparing for a combined review.
Discuss Your Company’s ACA Audit with a Lawyer at Thorn Law Group
If your company is facing an ACA audit in New York, we encourage you to contact us promptly for more information. To schedule a confidential consultation with a lawyer at Thorn Law Group, please call (914) 534-6004 or tell us how we can get in touch online today.
