FORMS 1094-C AND 1095-C: SMALL ALEs SHOULD PREPARE FOR MANDATORY ELECTRONIC FILING AS EARLY AS MARCH 31, 2022
If you are an applicable large employer (ALE) under the ACA and have historically filed annual Forms 1095-C (along with the Form 1094-C Transmittal form) with the IRS in paper format, then your world could change very soon. If recently proposed IRS regulations are finalized in time, the expansion of electronic filing of information returns will apply to your 2021 Forms 1095-C due to be filed with the IRS by March 31, 2022.
On July 23, 2021, the IRS issued proposed regulations that substantially expand electronic filing of information returns, including the Form 1094/95 series required of ALEs under the ACA. This proposed expansion applies in two ways:
- It lowers the current 250-return paper/electronic threshold, which has applied separately to each type of information return required to be filed by the employer. The threshold will be:
- 100 returns for filing deadlines due during calendar year 2022
- 10 returns for filing deadlines due in 2023 and thereafter
- It aggregates different types of information returns required of the employer – including the number of Forms W-2 — to determine if the new lower threshold number is met, rather than applying the threshold separately to each type of information return
Until recently, the federal tax code prevented the Secretary of the Treasury (through the IRS) from requiring any person to file information returns electronically unless the person was required to file at least 250 returns during the calendar year. However, the tax code was amended in 2019 to change the statutory 250-return threshold to a decreasing number over several years.
The effective date of the proposed regulations will be the date they are published as final in the Federal Register. However, the proposed regulations would not apply to information returns required to be filed before January 1, 2019. They would apply to information returns that must be filed after December 31, 2018. The delayed applicability date is intended to give reporting entities time to comply with the proposed regulations.