The IRS is Targeting Affordable Care Act (ACA) Compliance in Penalty Audits

The Affordable Care Act (ACA) requires that many businesses provide health insurance coverage to their employees. While there are tax credits available to help offset the costs of providing this coverage (and while alternatives are available in some cases), covered businesses need to prioritize compliance—and they need to be prepared to demonstrate compliance when necessary. As Boston IRS attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, explains, the Internal Revenue Service (IRS) is prioritizing ACA compliance, and businesses targeted in penalty audits can face steep consequences for non-compliance.

Understanding ACA Health Insurance Compliance for Businesses

Under the ACA, businesses with 50 or more full-time employees (or full-time equivalent employees) must generally provide health insurance coverage to their workforce. In addition to providing the required coverage, these businesses must also file an annual information return with the IRS. Furthermore, as the IRS explains, “[r]egardless of size, all employers that provide self-insured health coverage to employees must file an annual return reporting certain information for each covered employee and provide the same information to covered individuals.”

While the ACA was intended, in part, to help simplify health insurance coverage in the United States, compliance with the statute’s insurance provisions can be complicated. However, this is not an excuse for non-compliance—and the IRS has made this clear in recent years. We have seen an uptick in IRS penalty audits targeting suspected non-compliance with the ACA, with these audits leading to substantial liability in many cases.

Responding to an IRS Penalty Audit Targeting ACA Non-Compliance

With this in mind, what do you need to know if the IRS is auditing your company under the Affordable Care Act? Here are some key considerations:

• ACA Non-Compliance Can Trigger Substantial Penalties – To encourage voluntary compliance with its health insurance provisions, the ACA includes substantial penalties for companies that do not provide the required coverage.
• The IRS Expects Companies to Have Clear Documentation of ACA Compliance – Companies that have clear documentation of ACA compliance can streamline the penalty audit process, while those that do not have adequate documentation on hand can face heightened risks.
• In All Cases, a Proactive and Informed Approach is Essential – Regardless of a company’s ACA compliance record and the documentation it has available, a proactive and informed approach is essential for avoiding unnecessary consequences during an IRS penalty audit.
• Non-Compliant Companies Have Options Available – While IRS penalty audits can present substantial risks for non-compliant businesses, there are strategies available for mitigating the risks involved.
• The IRS Might Not Solely Be Focusing on ACA Health Insurance Compliance – While the IRS is prioritizing ACA health insurance compliance in 2024, this is by no means the IRS’s only enforcement priority.

Schedule an Appointment with Boston IRS Attorney Kevin E. Thorn

If your company is facing an IRS penalty audit under the Affordable Care Act, we encourage you to contact us promptly for more information. Call 617-692-2989 or contact us online to schedule an appointment with Boston IRS attorney Kevin E. Thorn, Managing Partner of Thorn Law Group.