5 Key Facts About IRS Penalty Audits Under the Affordable Care Act (ACA) for New Jersey Businesses

If your business is facing scrutiny from the Internal Revenue Service (IRS) under the Affordable Care Act’s (ACA) health insurance mandate, you are not alone. We have seen a significant uptick in IRS penalty audits targeting ACA non-compliance over the past several months. These audits present substantial risks, so an informed and strategic defense is critical. Here are some key insights from New Jersey IRS lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group:

Important Insights Into the IRS’ Efforts to Enforce ACA Compliance

1. The ACA’s Health Insurance Mandates Are Complicated

The Affordable Care Act’s health insurance provisions are extremely complicated. They establish detailed requirements—some of which have changed over time. But, despite the challenges of compliance, the IRS expects employers to consistently meet their obligations—and it expects them to be prepared to affirmatively demonstrate compliance upon request.

2. The IRS is Examining All Aspects of ACA Compliance

When conducting penalty audits under the Affordable Care Act, the IRS is examining all aspects of ACA compliance. With this in mind, some examples of compliance issues that can lead to problems during IRS audits include:

• Failing to maintain ACA-mandated health insurance coverage;
• Failing to provide “minimum essential coverage,” “minimum value” or “affordable” options to employees;
• Failing to make all required federal filings (including filing information returns with the IRS);
• Improperly claiming tax credits under the ACA’s health insurance provisions for smaller employers; and,
• Misrepresenting ACA compliance to the IRS in an employer’s filings or during the audit process.

3. ACA Non-Compliance Can Trigger Substantial Penalties

Employers that fail to provide the health insurance coverage required by the ACA can face penalties of up to $2,970 per full-time employee (excluding the first 30 employees for whom coverage was not properly provided). For many employers, this can mean hundreds of thousands of dollars, if not millions of dollars, in potential penalty exposure.

4. IRS Penalty Audits Under the ACA Can Target Other Violations As Well

Affordable Care Act compliance is just one of many enforcement priorities the IRS is targeting in 2024. If a penalty audit uncovers evidence of other violations, these violations can lead to additional penalties.

5. Businesses That Aren’t Yet Facing Scrutiny Can (and Should) Take a Proactive Approach

In light of the risks involved with facing an IRS penalty audit under the ACA, businesses that aren’t yet facing scrutiny should take a proactive approach to mitigating their exposure. While there are a variety of potential options available, choosing how best to resolve any particular issue requires a critical assessment of the specific facts and circumstances involved.

Request an Appointment with New Jersey IRS Lawyer Kevin E. Thorn

If you need to know more about mitigating your company’s risk related to the Affordable Care Act’s health insurance mandate, we encourage you to get in touch. To request an appointment with New Jersey IRS lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 201-842-7696 or contact us online today.