ACA mistakes can result in some serious penalties for employers. But, as we all know, staying in compliance with the Affordable Care Act (ACA) is time-consuming and complicated — and can also be riddled with issues that pop up and make your IRS filings nearly impossible. So, what’s an employer to do? Keep reading to find out the top ACA mistakes so that you can start avoiding them today and how to get some professional help along the way.
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The most common ACA mistakes that result in the highest penalties include:
Businesses are required to classify their employees with the appropriate classifications in order to ensure the appropriate amount of income taxes are being withheld and Social Security and Medicare taxes are paid by employees. If your employees are classified wrong, you will end up underpaying or overpaying them.
IRS employee classifications include:
If the IRS determines an employee has been misclassified, the employer could face the following penalties:
It is incredibly important to accurately document and report employee time periods in order to accurately determine ACA full-time status. You should regularly be tracking:
Considering health benefits as part of the Affordable Care Act may seem glaringly obvious — but employers still make this mistake. You must carefully consider the health plans you offer your employees and ensure documentation is readily available that details the quality of the health plan, cost, who it’s offered to and the time frames. It’s also important to account for special plan arrangements such as flex credits, opt-out payments and HRAs.
A significant IRS penalty can be imposed if an employer fails to accurately group related entities under the Affordable Care Act. In many cases, businesses may not classify as a full-time employer in their individual capacity, but when they are grouped together via an Aggregate Employer Group Analysis, they form an applicable large employer (ALE) and therefore must follow the rules set forth in the ACA’s Employer Mandate.
The IRS has approved two measurement methods — each benefits certain workforces. Failing to apply the measurement method accurately for your business can lead to inaccurate full-time counts and ensuing significant penalties from the IRS.
If you make one of the above-mentioned ACA mistakes, you will likely receive one of the following notice(s) from the IRS:
IRS penalties for non-compliance can send any business into crisis mode. Did you know that PEOs are specially trained in navigating our clients through crises? Read the nine benefits of working with a PEO during a crisis here.
America’s Back Office is an IRS-certified PEO — a claim that only four percent of all PEO companies can make! We have decades of experience helping businesses grow by taking HR-related tasks off their plates so they can focus on more pressing issues. Contact us today to learn more about how we can help you take your business to the next level.