March 13, 2023

IRS Final Rule Changes E-Filing Rules for ACA Forms in 2024

Employee Benefits

3 min read

Erica Honig, J.D., Senior Compliance Director, Employee Benefits

IRS Final Rule Changes E-Filing Rules for ACA Forms in 2024

Brief Summary: Under recently released IRS final rules for 2024, there will be a significant change with respect to which employers will be permitted to file certain tax information returns in paper format. Previously, employers filing less than 250 Forms 1095 with the IRS were permitted to complete their filing in paper format. For 2024, employers must aggregate all tax information returns and will be required to electronically file all tax information forms, including Forms 1095, if that number exceeds 10.

On February 21, 2023, the Internal Revenue Service (IRS) released final rules significantly expanding mandatory electronic filing (e-filing) requirements of certain employer tax information returns for 2024, including Affordable Care Act (ACA) Forms 1095, among others. For purposes of this article, we will focus on the Forms 1095 e-filing changes.

Under previous regulations, employers were permitted to file certain tax information returns with the IRS by paper, including Forms 1095, as long as they were filing up to 250 of the same return. Moreover, employers were not required to aggregate (or combine) different returns to satisfy the 250-return threshold for e-filing. For example, employers required to file 270 Forms W-2 and 150 Forms 1095-C with the IRS were only required to file Forms W-2 electronically with the IRS. They could still file Forms 1095-C in paper format since the Forms 1095-C, separately, did not meet the 250 filing threshold.

In a significant reduction from the 250-threshold, these final rules will require employers to file their Forms 1095 electronically if they file at least 10 returns in 2024 for the 2023 taxable year. Additionally, employers will be required to aggregate their information returns to determine whether they satisfy the 10-return threshold for e-filing. This means employers will be required to aggregate their Forms 1095s, Forms 1099, and Forms W-2 (along with the other tax information returns subject to these final rules) to determine their 10-return threshold for mandatory e-filing with the IRS.

The IRS may grant a waiver from these new e-filing threshold rules if employers can demonstrate undue hardship, generally determined if the cost of e-filing significantly exceeds the cost of paper filing.

Next Steps for Employers

This significant reduction in the e-filing threshold from 250 to 10 returns for 2024 will practically impact small employers who have historically filed paper returns with the IRS.

For ACA reporting purposes, this e-filing threshold change from 250 to 10 returns will primarily affect those employers who are Applicable Large Employers (ALEs)^[1] under ACA rules, but still under 250 employees. These ALEs who might have historically filed their Forms 1095 in paper format will be required to file them electronically with the IRS in 2024 for the 2023 taxable year.

These employers are advised to begin preparations with their benefit administration and/or payroll vendors to transition to electronic filing beginning in 2024.

Reach out to your Risk Strategies representative with any questions or contact us directly at benefits@risk-strategies.com.

[1] An ALE is an employer with at least 50 full-time employees, including full-time equivalent employees, on average during the prior calendar year.

The contents of this article are for general informational purposes only and Risk Strategies Company makes no representation or warranty of any kind, express or implied, regarding the accuracy or completeness of any information contained herein. Any recommendations contained herein are intended to provide insight based on currently available information for consideration and should be vetted against applicable legal and business needs before application to a specific client.

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