May 12th ACA penalties will go up in 2023
Ensuring your business continues to comply with federal laws and regulations is more important now than ever. Especially since the IRS more ACA (Affordable Care Act) penalties for non-compliance with Employer authorization.
also , extension The American Rescue Plan’s Enhanced Premium Tax Credits (PTCs) could lead to more penalties for employers. PTCs help the IRS run to determine ACA non-compliance. Adding to the headache is one of the provisions of the Inflation Reduction Act of 2022 – $80 billion for increased IRS taxes. So as a business owner, how can you ensure compliance with the ACA and avoid costly penalties?
In this article, we’ll outline the ACA’s 2023 penalty changes and explain how much non-compliance could cost your business. Also, we will reveal the most effective way to avoid ACA penalties.
What are the ACA Sanctions Changes for 2023?
The primary goal of the ACA is to ensure that more Americans have access to affordable health care coverage. To this end, large employers (at least 50 full-time employees) must follow strict regulations. In other words, business owners who fail to comply are subject to ACA penalties. The IRS increased the ACA penalty amounts for 2023, which it reflected in its recent update The Affordable Care Act FAQ page (Question 55).
For 2023, the 4980H(a) fine increased from $2,000 to $2,880, and the 4980H(b) fine increased from $3,000 to $4,320. Both are annual amounts, but the IRS calculates fines on a monthly basis. However, these are not the only changes affecting employers. Affordability threshold decreased from 9.61% in 2022 to 9.12% For plan years beginning on or after January 1, 2023.
What does it mean? The affordability threshold is a measure for employers to determine whether employer-sponsored health coverage is affordable for employees. Employers who do not comply will receive Letter 226JEmployment authorization penalty letter. According to the IRS, “This letter will explain all of your rights, including your right to appeal.” Employers, be aware. in note There is no statute of limitations for ACA penalties, which means that ACA non-compliance penalties can be issued for any reporting year to employers at any time, according to the IRS’ Office of Chief Counsel.
ACA 4980H Fine (A) Amount for 2023
For the year 2023, the penalty for 4980 AH (A) $240 a month, which adds up to $2,880per employee per year. So when does the IRS issue a 4980H(a) fine? According to the tax authoritythis occurs when an ALE (a viable large employer with at least 50 full-time employees) fails to provide Minimum Essential Coverage (MEC) for at least 95% of its full-time employees (and dependents) and at least one- Premium tax credit time factor to purchase coverage through the market.
Let’s look at an example.
Suzanne’s Natural Skincare Store employs 100 full time workers. The company offers MEC to 92 of them, which is 92% of its workforce and just below the ACA requirement of 95%. The other eight employees (who need an alternative health care plan) signed up for coverage through the ACA’s state health exchange. Then, the health exchange issued a PTC to the eight employees for all 12 months of the year.
This sounds good, but when employees included PTC information on their tax returns, the IRS was triggered to compare that data to information provided by their employers. The IRS found a match, determined the number of full-time employees at Suzanne’s Natural Skincare Store, and calculated a 4980H(a) penalty. Penalties can increase rapidly when calculated for the entire workforce, but the 30-employee cut-off will apply.
So, what would be the harm? The IRS has issued a whopping $201,600 fine to Suzanne’s Natural Skincare Store.
Here’s how the fine is calculated:
12 months x $240 = $2,880
$2,880 x (100-30) = $201,600
ACA 4980(b) penalty amount for 2023
Penalty 4980H(b) ACA is $360 month or $4,320 per employee in the 2023 tax year. It differs from the 4980H(a) penalty, which the IRS assesses on a per violation basis. A large employer is in violation when it offers health coverage to at least 95% of its full-time employees that the IRS considers implausible, not of minimum value, or both. The ALE must also require a worker to obtain a PTC to purchase coverage through the Marketplace.
Using an example, let’s see how the 4980H(b) ACA penalty might affect the workplace.
Pablo’s Pancake Palace employs 200 full-time ACA employees. All employees received an offer of coverage for 2023. However, the offers did not reach the IRS’ affordability limit of 9.12% for that tax year. Coverage was expensive for all employees, but only 70 workers received PTC from the state health exchange.
Pablo’s failure to comply caused the company to be fined 4980H(b) in the amount of $302,400.
Here’s how the fine is calculated:
12 months x $360 = $4,320
$4,320 x 70 = $302,400
If the employer violates the ACA non-compliance requirement for the same tax year, the IRS will not issue both penalties. Instead, the employer must pay the largest fine.
Why outsource ACA file submissions for your business?
The Affordable Care Act requires large employers to offer affordable health care to their employees, as well as maintain accurate records to demonstrate compliance. But regulations are complex, and business owners risk heavy fines by:
- Failure to meet ACA requirements as described above
- The deposit is not accurate
- Late filing
- No deposit at all
So how do you stay on the right side of the IRS? Comprehensive Payroll Partner ACA Submission Services will help you navigate the compliance maze with:
- Giving you a clear overview of your employees’ working hours so you can quickly determine eligibility.
- Accurately complete all required forms and file 1094 and 1095 with the IRS.
- Eligible ACA customers receive training and support from our ACA expert on how to code employees for ACA purposes.
- ACA related reports are available to clients within our payroll platform.
Move forward
The ACA aims to provide more Americans with affordable health care, but its regulations are strict and complex. In 2023, ACA penalties have increased dramatically, which means non-compliant employers are subject to large fines. Given that some provisions of the Inflation Control Act include $80 billion in IRS taxation, business owners should consider engaging with an expert to help them navigate the myriad of ACA rules.
Payroll Partners can keep your company in compliance and avoid penalties, so you can focus on running your business.
This information is provided on the basis that Payroll Partners does not provide legal, human or other professional advice or services. Professional advice on specific issues should be sought from an attorney, HR consultant or other professional.
