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Late Filing of Forms 1094-C and 1095-C


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Does anyone have any thoughts on what the likelihood is that the IRS will assess penalties under Code Section 6721 on a hypothetical ALE that failed (for no reason other than a lack of knowledge of the requirement) to timely file with the IRS Forms 1094-B and/or 1095-C for 2016?

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As with all these matters, they become fact intensive and I don't believe that anyone other than the IRS can speak to the likelihood of 6721 penalties.  It seems a prudent approach would be to file completely as soon as possible and rely on the possibility of penalty waiver.  26 U.S. Code § 6724 - Waiver; definitions and special rules, has a  "(a)Reasonable cause waiver" that indicates "No penalty shall be imposed under this part with respect to any failure if it is shown that such failure is due to reasonable cause and not to willful neglect."

In addition to the first steps of responding to the 5699 letter and asking for more time to prepare response, preparations for tax year 2018 should be well underway and the upcoming deadlines should be carefully observed. Being current is a good first step in preparing a reasonable response.

Secondly, the approach we at BenefitScape have taken is to mount a detailed effort to to file the delinquent returns with the IRS and prepare an analysis of why the initial report was not filed, such as reliance on an administrator or insurance carrier plan was fully insured to the installation of new software that did not provide this functionality, a new health plan was setup, a change in personnel etc. would be a good first step in establishing a failure due to a "reasonable cause."  From there we all hope that fortune favors the well-prepared! 

  

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