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12. What is Form 1094-C?

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What is Form 1094-C?

Jun 15, 2023 • 5 min read
IRS income tax forms
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      The Affordable Care Act (ACA) mandates that large employers provide health care coverage to their employees. The coverage must meet specific requirements, which the Internal Revenue Service (IRS) enforces through an annual reporting process.

      Form 1094-C is an essential part of that reporting process. Here’s what you should know about the document, including its purpose, who has to file it, and where to send it.

      What is a 1094-C form?

      Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, is a transmittal form that large employers must file with the IRS each year to comply with ACA requirements.

      Transmittals are cover sheets or summary documents that you must file alongside certain tax forms. For example, Form W-3 is the transmittal form for W-2 forms. Similarly, Form 1094-C is the transmittal form for 1095-C forms.

      It primarily contains identifying information about an employing entity, such as its name, address, and primary contact. In addition, it summarizes some of the information in the accompanying 1095-C forms, including whether the employer offered minimum essential health coverage to its employees.

      Form 1094-C helps the IRS verify that the filing employer complied with ACA regulations in the previous year. If the IRS finds out that an employer broke the rules, the agency can impose steep penalties on them for each violation.

      Form 1094-C vs. Form 1095-C.

      Form 1094-C and Form 1095-C complement each other but ultimately serve different purposes. Form 1094-C summarizes an ALE’s healthcare coverage details for all its employees and helps the IRS identify the ALE.

      Meanwhile, Form 1095-C contains healthcare information about a specific employee, including the months they were offered coverage, whether they enrolled, and their share of the monthly premium for the cheapest self-only coverage available.

      It primarily helps individual employees complete their tax returns. Most notably, they use their copy to determine their eligibility for the premium tax credit, which can reduce the cost of their coverage.

      Who must file a Form 1094-C?

      The ACA requires that applicable large employers (ALE) file Form 1094-C annually. Whether an employer is considered an ALE in a given year depends on the number of employees on their payroll.

      To qualify as an ALE, you must average 50 or more full-time employees in a calendar year. Your status can change from year to year if your employee count fluctuates. To determine your average number of full-time employees for the year, you must calculate the amount for each month, add them all together, and divide by 12.

      A full-time employee works at least 30 hours per week or 130 hours per month. Workers below that threshold don’t qualify as full-time employees. However, they equal a certain number of full-time equivalent (FTE) employees, which you must add to your count.

      To calculate the number of FTE employees you had on the payroll in a given month, add up the hours worked by all non-full-time employees during the period and divide the number by 120. Add the result to your full-time employee count to determine whether you’re an ALE.

      For example, say you had 30 full-time employees throughout 2022. You also had 35 non-full-time employees, and each worked 80 hours per month. Those 35 employees worked a combined 2,800 hours per month.

      Dividing 2,800 by 120 gives you 23.33 FTE employees. Having 30 full-time employees and 23 FTE employees puts you at 53.33 full-time employees. Since that’s above 50, you qualify as an ALE and must file a Form 1094-C for that year.

      How to file Form 1094-C.

      You must send a copy of Form 1094-C to the IRS each year alongside your 1095-C forms. However, you shouldn’t send one to your employees. You must send each employee a copy of their Form 1095-C, but only the IRS gets a copy of Form 1094-C.

      The easiest way to file Form 1094-C is to do so electronically through the IRS portal or another third-party software that can process them. However, you can also elect to send paper copies through traditional mail.

      If you file paper copies, you must date and mail them by February 28 of the year after the qualifying calendar year. However, if you file electronically, you have until the following March 31. For example, Forms 1094-C and 1095-C for the 2023 calendar year are due on February 28, 2024, or March 31, 2024.

      Failure to file these forms on time can get expensive, with a potential penalty of up to $310 per form due in 2024 if you file past August 1 or not at all. Fortunately, you can get an automatic 30-day extension by completing Form 8809.

      If you’re an ALE, make sure you send your Form 1094-C and 1095-C forms to the appropriate parties before the due date to protect your finances. If you need help completing the documents, consider consulting a Certified Public Accountant.

      About the author
      Nick Gallo, CPA

      Nick Gallo is a Certified Public Accountant and content marketer for the financial industry. He has been an auditor of international companies and a tax strategist for real estate investors. He now writes articles on personal and corporate finance, accounting and tax matters, and entrepreneurship.

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