IRS Section 6055 and 6056

By: Robert Pusateri, Capstone Brokerage Benefits Consultant February 25, 2015

This year there will be new challenges for everyone that files taxes. There is a new employer reporting system for Health Plan Coverage that the IRS will need in order to collect data to see if we are eligible to avoid the individual penalty.

IRS Code Sections 6055 and 6056

Information reporting under Section 6055 and 6056 is voluntary (not mandatory) for calendar year 2014. Reporting is first required in early 2016 with respect to the calendar year for 2015, according to IRS.gov)

The Affordable Care Act (ACA) has created new reporting requirements under Internal Revenue Code (Code) sections 6055 and 6056. Under these new reporting rules certain individuals and employers must provide information to the IRS about the type of health plan coverage they have. This would dictate if anyone qualifies for a premium subsidy or penalty which is paid at tax time.

This additional reporting is intended to help the IRS promote transparency with respect to current individual health plan coverage and costs that we pay. It will also provide the IRS/government with information to administer other ACA mandates or penalties – like the individual mandate which states we must all have health care coverage at a minimum level or pay a penalty. However, this year when we file our taxes in 2015 for the 2014 tax year we will be on the honor system.

The new IRS Code sections 6055 and 6056 reporting requirements were set to take effect in 2014. However, on July 2, 2013, the Treasury Department announced that it will provide individuals and employers with an additional year to comply with these new health plan reporting systems and requirements. The first returns will be due in early 2016 for coverage provided in 2015. The information will be used by the IRS to administer and for everyone to show they are compliant to avoid paying any penalties at tax time.

On July 9, 2013, the IRS also issued a Notice 2013-45 to provide some relief for the year 2014 for the new Code sections 6055 and 6056 information reporting systems and requirements. Under the new transition relief, employers and individuals are encouraged to voluntarily comply with the reporting requirements for 2014 once the IRS issues reporting rules, which are expected this summer.

However, compliance with the reporting rules is completely optional for 2014 and no penalties will be applied for failing to comply or submit paperwork. Below is a chart that shows whom will be affected.

TAX CHART

Details of how to report Section 6055 and 6056 will be in our next blog including new tax forms. We will focus on Section 6055 and Section 6056 separately.