Big Changes to ACA Electronic Filing Rules for Small Businesses

On February 23, 2023 the IRS expanded the requirement to file certain information returns electronically, including Affordable Care Act (ACA) returns.

While you may still be in the midst of filing 2022 ACA returns, the IRS made a change that could have a big impact on how you and other smaller businesses file in 2024.

The New Rule

On February 23, 2023, a final rule (TD 9972) was passed, expanding the requirement to file certain information returns electronically, including Affordable Care Act (ACA) returns. In an effort to modernize its return-filing process and work towards the elimination of paper filing, the IRS is lowering the 250-return threshold for mandatory electronic reporting to 10 returns. This rule will be applicable for returns required to be filed in 2024. Thankfully, the electronic-filing threshold for returns required to be filed in 2023 remains at 250.

But, there is more to this change than initially meets the eye. Whereas the previous 250-return threshold applied separately to each type of information return, the new rule aggregates your returns across forms, including information returns (Forms W-2, 1099 and 10095), income tax returns, employment tax returns, and excise tax returns. If your aggregated number of forms equals more than 10, you will have to file electronically.  So, starting in 2024, it appears that only the smallest of small businesses may have the option to file on paper.

What does this mean?

It means that unlike the previous rule, where the counts of each form were separately considered in determining if you needed to file electronically, going forward your total number of forms will be added together to determine if you surpass the threshold. 

For example, this year you could have had 240 W-2s and 240 1095-Cs to file and could have filed each on paper, because they were each under the current 250-form threshold.

Starting in 2024, your 240 W-2s and 240 1095-Cs will be combined to determine if the threshold is met and will be measured against a 10-form threshold.  

240 +240 = 480 > 10

In this example, you would be significantly over the threshold and be required to file electronically.  

The rule does specify that you can apply for and potentially be granted a waiver from electronic filing if you can demonstrate undue hardship. But, if you are denied a waiver and required to file electronically but fail to do so, you may be subject to a penalty of $290 per return unless you establish reasonable cause.

If you are currently filing paper returns, you will likely be above the 10-form threshold for 2024. To help you avoid potential penalties, you should begin considering how you will transition to electronic filing and gain the ability to create the files in the IRS required XML spec. 

Affordable Care Act Management from Equifax Workforce Solutions

Requirements around the ACA are seemingly ever-changing and keeping up to date can be a challenge. Equifax Workforce Solutions can help you better manage your ACA efforts, including helping you calculate affordability, employee eligibility, tracking offers of coverage, reporting, and more. Learn more by reading our free guide, ACA Penalties and What They Could Mean for Your Company and visit our ACA Management page for more information.

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