This month the IRS began issuing Notice 972CG proposing penalties against Applicable Large Employers (ALEs) for certain filing failures related to their 2018 Forms 1095-C. If an ALE filed these forms late or did not file electronically when required, it will face a general penalty of $270 per filing failure.
Here are the top three things ALEs should know about Notice 972CG:
- Internal IRS Errors Incorrectly Triggering Some Notices
For those ALEs who submitted filings electronically through the IRS ACA Information Return (AIR) system, they should be aware that some of the 972CG notices have been incorrectly proposing late filing penalties by referencing the date in which corrected filings were submitted. ALEs should carefully review the electronic filing details of their 2018 Form 1094-C and 1095-C filings to determine the date in which its initial filings were transmitted to the AIR system, as that should be the date that controls whether those filings were timely submitted by the April 1, 2019 electronic filing deadline. This may require that the ALE reach out to any third-party vendor who filed such forms on its behalf.
- Removal of Penalties May Require Establishing Reasonable Cause and Addressing 2020 Form 1094/1095-C Reporting
Assuming an internal IRS error is not the reason for the penalty notice, the ALE will likely need to provide a written response that explains why it qualifies for reasonable cause relief under TREAS. REG. § 301.6724-1. Among other things, this requires an ALE to explain how it has corrected its past filing failures from the 2018 tax year and the steps it is taking to prevent these filing failures from reoccurring with its 2020 filings. In other words, the IRS requires assurance that the ALE will not continue to have the same filing errors, so the ALE should ensure its response addresses how it is preparing for fully complying with the Form 1094-C and 1095-C reporting requirements for the 2020 tax year.
- Response Deadline Requires Urgent Action
Any response to Notice 972CG must be received within 45 days from the date of the notice, which results in a tight timeline for the ALE. After allowing for mailing time, the ALE must locate and review any documentation associated with its filing, discuss the filing error with involved parties, and submit a written response that addresses why it qualifies for reasonable cause relief as defined in IRS regulations all within this 45-day window. This response deadline can be even more problematic when personnel changes have occurred, and the ALE has lost internal historical knowledge for these filings.
If you have received a Notice 972CG proposing penalties for your Form 1094/1095-C filings and would like assistance, the Law Office of Haff & Raggio, PLLC can help. Please reach out to us at 210-323-7846 and ask for Heather Garcia for more information. You can find more information at www.haffraggiolaw.com