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November 20, 2017

For the first time, IRS is penalizing businesses under the employer mandate

Daily Briefing

    IRS for the first time is enforcing the Affordable Care Act's employer mandate.

    The ACA mandates that businesses with 50 or more workers offer coverage to employees who work an average of at least 30 hours per week. Employers in 2015 began submitting reports to the IRS detailing their coverage options and number of full-time employees. However, IRS had not enforced the provision until now because of problems processing the reports in its compliance systems, according to the New York Times.

    The Congressional Budget Office has estimated that the mandate would generate $207 billion in penalty payments over a decade.

    Letter details

    The penalty notification letters, which IRS began sending in October, are based on the reports companies submitted for 2015.

    According to the Times, the first round of letters was sent to businesses with at least 100 full-time employees that the agency determined owed money for not complying with the law in 2015. Though fines may vary, the Times reports companies generally will face fines of about $2,000 per employee, excluding the first 30 workers, if they do not meet the ACA's minimum essential coverage and affordability requirements. The penalty is triggered if at least one employee purchases federally subsidized coverage on the exchanges, according to the Times.

    IRS in the letter said companies have 30 days to dispute the payment notification.


    Because of IRS' past computer trouble, some experts expect many of the payment notices will be inaccurate, which could have a disproportionate effect on small or midsize companies, the Times reports.

    According to the Times, large companies generally offer comprehensive coverage and employ experts to handle tax-related disputes with IRS. But smaller companies may not have the resources to examine the documents and file a payment dispute.

    Kevin Kuhlman, the director of government relations for the National Federation of Independent Business, said, "It's been very obscure and confusing," adding, "The lag time is worrisome. We're talking about penalties for 2015, and here we are almost in 2018" (Cowley, New York Times, 11/16; Gooch, Becker's Hospital CFO Report, 11/16).

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