IRS Penalty Audits Under the Affordable Care Act (ACA): What Employers in Maryland Need to Know

Non-compliance with the Affordable Care Act’s (ACA) health insurance requirements can trigger substantial penalties. The Internal Revenue Service (IRS) is auditing ACA compliance in 2024; and, in doing so, it is scrutinizing employers’ records for evidence of any and all statutory violations. For employers targeted in these IRS penalty audits, an informed and proactive defense is essential. Learn more US International Tax Advisors:

The IRS is Targeting All Forms of ACA Non-Compliance

Due to apparent widespread violations of the ACA’s health insurance requirements for covered employers, the IRS is now taking an aggressive approach to examining and enforcing compliance. When conducting penalty audits under the ACA, revenue agents are looking for evidence of violations including (but not limited to):

• Failure to obtain (or maintain) ACA-mandated health insurance
• Failure to provide “minimum essential coverage” under the ACA
• Failure to provide “minimum value” under the ACA
• Failure to provide “affordable” coverage options to employees
• Failure to file all required tax and information returns with the IRS
• Improperly claiming ACA tax credits
• Misrepresenting ACA compliance to the IRS

Again, these are just examples. When facing an IRS penalty audit, it is essential to have a clear and comprehensive understanding of any and all risks involved. For employers that have violated the ACA, being prepared to address their violations proactively can be essential for avoiding unnecessary consequences.

ACA Non-Compliance Can Trigger Substantial Penalties

Why is it important to be prepared for an IRS penalty audit under the Affordable Care Act? If left unmitigated, violations of the ACA’s health insurance requirements can expose employers to substantial penalties. In many cases, employers found in violation of the ACA will face other tax-related penalties as well. The penalties for violating the ACA’s health insurance requirements can be up to $2,970 per full-time employee (as of 2024), and tax-related penalties can easily climb into the hundreds of thousands, if not millions, of dollars for employers.

Avoiding ACA Penalties Requires an Informed and Proactive Defense

With this in mind, what should employers do when facing ACA-related scrutiny from the IRS? Upon learning of an IRS penalty audit, some key preliminary steps include:

• Locating Relevant Compliance and Tax Documentation – Employers should locate all relevant compliance and tax documentation when preparing for an IRS penalty audit under the ACA. Having this documentation readily available can help streamline the audit process while also mitigating the risks involved.  
• Assessing ACA Health Insurance Compliance – Employers should work with their counsel to assess their ACA compliance record and determine what violations (if any) revenue agents may find.
• Determining How Best to Proceed – After completing this compliance assessment, employers should then work with their counsel to determine how best to approach the IRS’ inquiry in light of the circumstances at hand.

Learn More from US International Tax Advisors

If your company is facing IRS scrutiny related to the Affordable Care Act’s health insurance requirements for employers, we encourage you to contact us promptly for more information. Call 844-796-8565 or contact us online to schedule an appointment with US International Tax Advisors.