Frequently Asked Questions

 The Taxpayer First efile provisions go into effect January 1, 2024. 

Prior to 2024, employers with fewer than 250 forms of any type could mail forms to the IRS. That means if an employer had fewer than 250 W2s, they could mail them; fewer than 250 1095s, they could mail them, etc. With the new IRS rules, an employer must electronically file ALL forms if they have a combined total of 10 forms – that’s TEN W2s, 1099s, and 1095s COMBINED! 

If you have more than 10 employees, the new file provision will effect your business and will require you to efile all W2s, 1095s, and 1099s with the IRS. 

Employers who average more than 50 Full-time and Full-Time Equivalent employees per month across the previous tax year are considered Applicable Large Employers (ALEs) and  are required to complete ACA end-of-year reporting using the 1095-C form. 

The IRS has a specific required calculation for determining employer monthly size. Not sure whether your company was an ALE? Use our calculator -- linked at the bottom of this page -- to find out. 

In addition to ALEs, all employers who offer a self- or level-funded insurance plan, regardless of size must complete end-of-year reporting. Groups with fewer than 50 FT or FTE employees per month use form 1095-B, while ALEs with self- or level-funded plans use form 1095-C with Part III completed. 

The IRS provides the following definitions for Full-time and Full Time Equivalent employees for the purposes of determining Large Employer Status: 

A full-time employee for any calendar month is an employee who has on average at least 30  hours of service per week during the calendar month, or at least 130 hours of service during the calendar month.

A full-time equivalent employee is a combination of employees, each  of whom individually is not a full-time employee, but who, in  combination, are equivalent to a full-time employee. An employer  determines its number of full-time-equivalent employees for a month in  the two steps that follow:

1. Combine the number of hours of service of all non-full-time  employees for the month but do not include more than 120 hours of  service per employee, and
2. Divide the total by 120.

An employer’s number of full-time equivalent employees (or  part-time employees) is only relevant to determining whether an employer  is an ALE.  An ALE need not offer minimum essential coverage to its  part-time employees to avoid an employer shared responsibility payment.   A part-time employee’s receipt of the premium tax credit for purchasing  coverage through the Marketplace cannot trigger an employer shared  responsibility payment.

Need help determining your Full Time Equivalent Employee count? Use our complimentary ALE calculator (linked below)

Federal* Employee Distribution Deadline: March 2, 2024

IRS Mail Deadline: February 28, 2024

IRS Efile deadline: March 31, 2024

*CA has a state-level Individual Mandate, and the employee distribution deadline is January 31

Employers can use IRS Form 8809 to request an automation 30-day extension to the IRS deadline. In most cases, his is a one-time 30-day extension which pushes the Efile deadline to April 30.

There is no extension available for the Employee distribution deadline. 

This is the IRS definition of Large Employer status: 

• If an employer has at least 50 full-time employees, including  full-time equivalent employees, on average during the prior year, the  employer is an ALE for the current calendar year, and is therefore  subject to the employer shared responsibility provisions and the employer information reporting provisions.
• To determine its workforce size for a year an employer adds its  total number of full-time employees for each month of the prior calendar  year to the total number of full-time equivalent employees for each  calendar month of the prior calendar year and divides that total number  by 12.

Use our complimentary ALE calculator (linked at the bottom of this page) to determine whether your company is considered an ALE

Companies with common ownership of more than 50% must combine the employee averages for all companies to determine ALE status. 

In 2023, coverage is considered affordable for an employee if the employee portion of the premium does not exceed 9.12% -- the threshold percentage for 2024 was lowered to 8.39%

The IRS provides three Safe-Harbor calculations for employers to use to determine whether their plan is considered affordable for the employee: FPL, Rate of Pay, and W2

Question 39 in the IRS FAQ  describes the three calculations. 

Use our complimentary Safe Harbor Calculator to determine whether your plan is affordable (Downloads section at the bottom of the page). 

The main requirements of ACA for Applicable Large Employers (ALEs) are:

• Offering Affordable Minimum Essential Coverage that meets Minimum Value to at least 95% of eligible employees
• Dependents must also be offered Minimum Essential Coverage
• Employees must be notified whether the employer offer meets the ACA criteria and also be provided information about obtaining coverage through the Marketplace

The Federal Individual Mandate was repealed, but several states have implemented a state-level individual mandate that carry additional reporting requirements for employers, in some instances.

These states are: 

• California (Self- & Level-funded insurance plans complete state-level reporting)
• New Jersey (Self- & Level-funded insurance plans complete state-level reporting)
• Rhode Island (State reporting required for all plan types)
• Massachusetts (State-level 1099HC form required for self- and level-funded)
• Washington DC (State reporting required for all plan types)

For most Fully Insured plans, the carrier will provide all enrolled participants with a 1095-B form. The 1095-B form shows only who was enrolled and for what months. 

If you are an ALE, the 1095-B form does not fulfill your Employer reporting requirement. 

In addition to the 1095-B form provided by the insurance carrier, employers must complete the 1095-C form, provide a copy of the form to their employees and submit copies to the IRS. 

If you were an ALE, you will need to produce the 1095-C forms and submit them to the IRS.

If you have received a 5699 letter from the IRS, respond to the IRS within the timeline defined in the letter. We provide assistance with IRS response letters, so contact me ASAP if you receive a letter.  

For 2023:

• Penalty A is $2,880 (or $240/month) per eligible employee, minus the first 30
• Penalty B is $4,320 (or $360/month) per employee who received a Premium Tax Credit through the Marketplace.

These amounts will increase in 2024: Penalty A - $2,970 and Penalty B - $4,460

• 1865-C:  Received when an employer physically mails forms to the IRS, and the IRS cannot find part of the submission.  
• 5699 series:  The IRS thinks you are an applicable large employer based on the number of W2s filed for the tax year. 
• 226-J series: This is an ESRP penalty letter. It means that one or more of your employees went to the marketplace and received a premium tax credit for coverage. 

If you receive an ACA related penalty letter from the IRS, give us a call. 

If you have seasonal, temporary, or part time employees who work 30+ hours per week, it may be a good idea to establish a look back measurement period. y for benefits. These range anywhere from Date of Hire to 90-days. 

Under ACA, Large Employers must also track the hours of the seasonal and variable hour employees to determine whether they meet the requirements for benefits eligibility. 

There are two measurement period options:

• look back measurement
• monthly measurement

If you don’t have a look back measurement period in place, the default is monthly measurement, meaning you review all variable employee’s hours each month the determine their eligibility in the following month. 

If you have seasonal, temporary, or part time employees who work 30+ hours per week, it may be a good idea to establish a lookback measurement period.