ACA information return penalties, explained.
Two separate IRS penalties apply to ACA reporting. One is for failing to file correct returns on time and the other is for failing to give employees correct statements on time. Each is charged per return and per statement.
What the IRS says.
Two Penalties Charged Separately
The IRS states it charges separate penalties for failing to file a correct information return on time and for failing to provide correct payee statements on time. The penalty applies to each return and each statement.
Rates Rise With Lateness
For returns due in 2025 the IRS rate is $60 up to 30 days late, $130 from 31 days through August 1, and $330 after August 1 or not filed. For returns due in 2026 the rates are $60, $130 and $340.
Intentional Disregard Costs More
The IRS publishes $660 for returns due in 2025 and $680 for returns due in 2026 where there is intentional disregard, and states there is no maximum penalty in that case.
Three steps for the employer.
Check the Notice First
The IRS says to check that the information on a notice is correct, follow its instructions, and that if you can correct an issue there may be a reduced or no penalty.
File Electronically When Required
The IRS states that starting with returns due in 2024, an employer with 10 or more information returns must file them electronically, unless it receives a hardship waiver on Form 8508.
Ask for Relief When You Qualify
The IRS may remove or reduce a penalty for reasonable cause. If you receive Notice 972CG and have reasonable cause, the IRS says to respond within 45 days before it assesses the penalty.
Three questions to settle first.
Which Years and Forms Are Named?
Ask which tax years and which forms the IRS notice covers before you respond.
How Many Returns and Statements?
Ask your provider for the count of Forms 1094-C and 1095-C affected, since the penalty is per return and per statement.
Can We Cure It Before Assessment?
Ask whether filing the missing forms now can reduce or remove the penalty.
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