Employers and health coverage providers have a responsibility to comply with compliance under the Affordable Care Act. Failure to do so can result in hefty penalties from the IRS.
This article provides an overview of ACA penalty rates and the reasons that the IRS may impose penalties.
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Here are the major reasons why an employer or a coverage provider may receive ACA penalties from the IRS.
The next two reasons only apply to employers,
If an employer or a coverage provider fails to file ACA Forms or furnish recipient copies on time or file with incorrect information, the IRS issues penalty letters 5699, 5005-A, and 972CG with proposed penalties under sections 6721 and 6722 to the ALEs.
Here are the Penalty Rates (as revised by the IRS under sections 6721 and 6722) for failing to comply with ACA reporting requirements,
| Date that returns filed/furnished | Filing the correct ACA forms within 30 days after the due date | Filing between 30 days after the due date and August 1 | Filing on or after August 1 | Intentionally neglecting to file |
|---|---|---|---|---|
| From 01-01-2024 thru 12-31-2024 | $60 per return or statement Maximum - $630,500 | $120 per return or statement Maximum - $1,891,500 | $310 per return or statement Maximum - $3,783,000 | $630 per return or statement - No limitation |
| From 01-01-2023 thru 12-31-2023 | $50 per return or statement Maximum - $588,500 | $110 per return or statement Maximum - $1,766,000 | $290 per return or statement Maximum - $3,532,500 | $580 per return or statement - No limitation |
| From 01-01-2022 thru 12-31-2022 | $50 per return or statement Maximum - $199,500 | $110 per return or statement Maximum - $571,000 | $280 per return or statement Maximum - $1,142,000 | $570 per return or statement - No limitation |
| From 01-01-2021 thru 12-31-2021 | $50 per return or statement Maximum - $197,500 | $110 per return or statement Maximum - $565,000 | $280 per return or statement Maximum - $1,130,500 | $560 per return or statement - No limitation |
| Due 01-01-2020 thru 12-31-2020 | $50 per return or statement Maximum - $194,500 | $110 per return or statement Maximum - $556,500 | $270 per return or statement Maximum - $1,113,000 | $550 per return or statement - No limitation |
| Due 01-01-2019 thru 12-31-2019 | $50 per return or statement Maximum - $191,000 | $100 per return or statement Maximum - $545,500 | $270 per return or statement Maximum - $1,091,500 | $540 per return or statement - No limitation |
| Due 01-01-2018 thru 12-31-2018 | $50 per return or statement Maximum - $187,500 | $100 per return or statement Maximum - $536,000 | $260 per return or statement Maximum - $1,072,500 | $530 per return or statement - No limitation |
| Due 01-01-2017 thru 12-31-2017 | $50 per return or statement Maximum - $186,000 | $100 per return or statement Maximum - $532,000 | $260 per return or statement Maximum - $1,064,000 | $530 per return or statement - No limitation |
| Due 01-01-2016 thru 12-31-2016 | $50 per return or statement Maximum - $185,000 | $100 per return or statement Maximum - $529,500 | $260 per return or statement Maximum - $1,059,500 | $520 per return or statement - No limitation |
| Due 01-01-2011 thru 12-31-2015 | $30 per return or statement Maximum - $75,000 | $60 per return or statement Maximum - $200,000 | $100 per return or statement Maximum - $500,000 | $250 per return or statement - No limitation |
| Date that returns filed/furnished | Filing the correct ACA forms within 30 days after the due date | Filing between 30 days after the due date and August 1 | Filing on or after August 1 | Intentionally neglecting to file |
|---|---|---|---|---|
| From 01-01-2024 thru 12-31-2024 | $60 per return or statement Maximum - $220,500 | $120 per return or statement Maximum - $630,500 | $310 per return or statement Maximum - $1,261,000 | $630 / No max |
| From 01-01-2023 thru 12-31-2023 | $50 per return or statement Maximum - $206,000 | $110 per return or statement Maximum - $588,500 | $290 per return or statement Maximum - $1,177,500 | $580 / No max |
| From 01-01-2022 thru 12-31-2022 | $50 per return or statement Maximum - $199,500 | $110 per return or statement Maximum - $571,000 | $280 per return or statement Maximum - $1,142,000 | $570 / No max |
| From 01-01-2021 thru 12-31-2021 | $50 per return or statement Maximum - $197,500 | $110 per return or statement Maximum - $565,000 | $280 per return or statement Maximum - $1,130,500 | $560 / No max |
| Due 01-01-2020 thru 12-31-2020 | $50 per return or statement Maximum - $194,500 | $110 per return or statement Maximum - $556,500 | $270 per return or statement Maximum - $1,113,000 | $550 / No max |
| Due 01-01-2019 thru 12-31-2019 | $50 per return or statement Maximum - $191,000 | $100 per return or statement Maximum - $545,500 | $270 per return or statement Maximum - $1,091,500 | $540 / No max |
| Due 01-01-2018 thru 12-31-2018 | $50 per return or statement Maximum - $187,500 | $100 per return or statement Maximum - $536,000 | $260 per return or statement Maximum - $1,072,500 | $530 / No max |
| Due 01-01-2017 thru 12-31-2017 | $50 per return or statement Maximum - $186,000 | $100 per return or statement Maximum - $532,000 | $260 per return or statement Maximum - $1,064,000 | $530 / No max |
| Due 01-01-2016 thru 12-31-2016 | $50 per return or statement Maximum - $185,000 | $100 per return or statement Maximum - $529,500 | $260 per return or statement Maximum - $1,059,500 | $520 / No max |
| Due 01-01-2011 thru 12-31-2015 | $30 per return or statement Maximum - $75,000 | $60 per return or statement Maximum - $200,000 | $100 per return or statement Maximum - $500,000 | $250 / No max |
When Applicable Large Employers fail to meet the ACA coverage mandate, the IRS issues them a Letter 226J to notify them that they are responsible for an Employer Shared Responsibility Payment (ESRP) under
section 4980H.
Note: The penalties are levied based on the information provided by employers on their 1094-C and
1095-C forms.
A penalty will be levied on an employer if
The penalty rate under the Section 4980H(a) is,
The penalty is calculated based on the total number of full-time employees minus the first 30 full-time employees. This calculation includes full-time employees who have minimum essential coverage under the employer’s plan or from other vendors.
For instance, If you are an ALE that has 55 full-time employees and any one of your full-time employees receives the premium tax credit in the tax year 2023, the IRS will penalize the employer
$72,000 ( (55-30) * 2880 ).
When an employer offers coverage to their employees but the offer is not affordable and doesn’t provide the Minimum Value (MV), or if the employee receives Premium Tax Credit (PTC) for the month, a penalty is levied.
Under section 4980H(b), this penalty rate is
If two employees received the premium tax credit in the year 2023, the penalty levied by the IRS is
$8640 ($4320*2).
ACAwise is an IRS-authorized, SOC 2 Certified ACA reporting provider that enables its clients to meet their ACA reporting requirements with ease and accuracy.
ACAwise is a full-service provider that offers a complete solution for filing and distributing accurate ACA forms. The team of experts at ACAwise ensures accurate information and an easy filing process by performing the following validations.
