ACA Compliance Issues and the 1865-C Letter
ACA compliance continues to create struggles for employers. Recently, employers are receiving more inquiry letters from the IRS, especially letter 1865-C. This is a letter sent out for issues with incorrect or missing forms for 1094/1095 B and C filings.
The problem is some organizations receive these letters even when they have completed all forms correctly. This is due largely to backups on IRS processing and outdated equipment at these processing plants. These letters are not always clear, and some organizations continue to receive them even after the forms have been resent.
While this is frustrating, there are some precautions employers can take moving forward.
Who is Receiving 1865-C Letters?
HR Service Inc. has seen fewer than 3 percent of companies receiving the 1865-C letter at this time. Those receiving the letters are primarily on the West Coast where the primary processing plant has outdated equipment and not enough employees to keep up with the processing demand.
The lack of organization and proper equipment means paper forms are easily lost, disorganized, or damaged. When this occurs, the 1865-C letters are sent out to employers stating multiple issues of incomplete information or the wrong format for the documents.
These letters are sent even when forms have been submitted completely and correctly. These letters also tend to be confusing as they only show the number of forms that weren’t processed. This makes it difficult to determine the specific forms in question.
As all forms from a company would be filed using the same format, and documentation, these letters leave more questions than answers.
Recommendations for ACA Form Submission
As employers continue to comply with ACA requirements moving forward, it is recommended that all ACA form submission occurs through the e-file system. In the past, industry experts have recommended sending paper forms with tracking, but the tracking information is only kept for 120 days unless additional fees are paid to maintain the tracking information for longer.
The letters being sent are from the 2019 and 2020 filing seasons, and resending documents by mail is resulting in further 1865-C letters from the IRS. Experts recommend resubmitting forms using the e-file system and providing written documentation that includes submission confirmation information.
E-file submission allows for easier responses if another letter is received. Employers can provide a written response that provides the confirmation information instead of resubmitting documentation.
Moving forward, experts recommend filing all ACA documentation through the e-file system each year to maintain proof of ACA compliance. As employers move to e-filing, the hope is that the issue with multiple 1865-C letters will end.
Communicating with the IRS
When communicating with the IRS, it is best to do so in writing. When employers call the numbers provided on the letters, representatives are responding to fewer than 11% of the inquiries. Additionally, if instructions are provided by the IRS via phone, it is difficult to track the instructions received or the proof of complying with those instructions.
Respond to all IRS communications with a letter, showing you have met the ACA compliance requirements. Provide copies of all necessary documentation, keeping the originals, and provide any confirmation numbers to show that forms have been submitted. Be sure to keep records of all written correspondence, postmark dates, and IRS letters received.
Reduce Your ACA Reporting Stress
ACA reporting can be stressful, especially as the IRS works to catch up on backlogged documentation. HR Service provides a full service to take care of your ACA compliance needs.
Whether you need help filing documentation, responding to inquiry letters, or have questions to complete your reporting requirements, our ACA specialists can walk you through each step. Contact us at 833-685-8400 x 1 or firstname.lastname@example.org to get started.
Written by: Penny Clarke, Content Specialist