1094-C Rejections

Client was submitting their 1094-C filings with the IRS electronically and two employees’ names kept getting rejected.  The client learned that they were not authorized to work in the U.S. so the client had to let them go.  The client isn’t sure what to do next; I suppose the filing must be incomplete. Any suggestions on how to make sure their 1094C filings are accepted?

Are you sure the filing was not accepted?  I believe a filing can still be "accepted with errors."  If you're able to correct the errors, you can re-file until the error message is gone.   Anyone else able to chime in?

18 hours ago, Sabrina1 said:

Are you sure the filing was not accepted?  I believe a filing can still be "accepted with errors."  If you're able to correct the errors, you can re-file until the error message is gone.   Anyone else able to chime in?

Thank you for the response!  It was rejected due to the employee's name: "TIN Validation Failed."  They tried to resubmit by changing the EE's full name but that did not work either.  The employees indicated they could no longer provide documentation verifying their authorization to work in the US, and they do not have any other name/TIN for those employees.  

I'm assuming this came up on the 1095-C (as opposed to the 1094-C), and that the filing was accepted with errors.

Based on the instructions, you will have a good argument that no penalties should apply because you have satisfied the reasonable cause criteria by acting in a responsible manner to verify the information on the 1095-C matches the information provided by the employee.  (Note if the plan is self-insured and these are dependent SSNs, there are specific steps you have to take to meet this standard--but I assume we're talking about EE SSN/TIN info here).

Forms 1094-C and 1095-C Instructions:

https://www.irs.gov/instructions/i109495c

If you fail to file correct information returns or fail to furnish a correct recipient statement, you may be subject to a penalty. However, you are not required to file corrected returns for missing or incorrect TINs if you meet the reasonable cause criteria. For additional information, see Pub. 1586, Reasonable Cause Regulations and Requirements for Missing and Incorrect Name/TINs on Information Returns.

IRS Publication 1586:

https://www.irs.gov/pub/irs-pdf/p1586.pdf

III. REASONABLE CAUSE

To show that the failure to include a correct TIN was due to reasonable cause and not willful neglect, filers must establish both that they acted in a responsible manner both before and after the failure occurred and that:

• There were significant mitigating factors with respect to the failure (for example, an established history of filing information returns with correct TINs), or

• The failure was due to events beyond the filer’s control (for example, actions of the payee or any other person).

Except as otherwise stated in this publication, acting in a responsible manner for missing and incorrect TINs generally includes making an initial solicitation (request) for the payee’s name and TIN and, if required, annual solicitations.

Mitigating factors or events beyond the filer’s control alone are not sufficient to establish reasonable cause. Upon receipt of the newly provided TIN, it must be used on any future information returns filed. Refer to Treas. Reg. 301.6724-1 for all reasonable cause guidelines.

IRS ACA AIR Presentation:

https://www.irs.gov/pub/info_return/June_2016_Webinar_Presentation.pdf

Very helpful, Brian - thank you.  I believe it was the 1094-C and that it was accepted but with errors detected.  It seems that their TINs are no longer valid as they're not eligible to work in the US, and I don't think we can just have them refile without including them as they were working during the reporting period.  Maybe we sit tight and just wait for a letter proposing a penalty and then demonstrate reasonable cause?  

Yeah that's what I would do in that situation.

This may also be helpful re: the TINs....

EY Tax Alerts Employers receiving nameTIN mismatches during.pdf

Incredibly helpful alert.  Looks like they should confirm they received an "acknowledgement report" indicating the return was filed (although with errors) versus that the filing itself was rejected.   If that's accurate, I think they should sit tight as I found a TIN resource that does confirm they do not match IRS records, and since they're no longer employees I don't think it's critical to do more with them.  If the IRS notifies them of a penalty, we can then reply with a demonstration of reasonable cause showing that we acted responsibly, etc.  But I think that would be better than filing a "corrected" return that excludes the relevant employees. 

If the return itself was rejected (which the software vendor should be able to verify), then I suppose they could consider filing again but excluding them, but all indications that I've seen are that the return was accepted but with noted errors. 

THANKS AGAIN to both of you.