IRS Extends Deadline for Furnishing Form 1095-C to Employees, Extends Good-Faith Transition Relief for the Final Time

This alert was updated on October 05, 2020 

The Internal Revenue Service (IRS) has released Notice 2020-76, which extends the deadline for furnishing  2020 Forms 1095-B and 1095-C to individuals from January 31, 2021 to March 2, 2021. The Notice also  provides penalty relief for good-faith reporting errors and suspends the requirement to issue Form 1095-B to  individuals, under certain conditions.  

The due date for filing the forms with the IRS was not extended and remains March 1, 2021 (March 31, 2021  if filed electronically).  

The regulations allow employers to request a 30-day extension to furnish statements to individuals by sending  a letter to the IRS with certain information, including the reason for delay; however, because the Notice’s  extension of time to furnish the forms is as generous as the 30-day extension contained in the instructions,  the IRS will not formally respond to requests for an extension of time to furnish 2020 forms to individuals.  Employers may obtain an automatic 30-day extension for filing with the IRS by filing Form 8809 on or before  the due date. An additional 30-day extension is available under certain hardship conditions. The Notice  encourages employers who cannot meet the extended due dates to furnish and file as soon as possible and  advises that the IRS will take such furnishing and filing into consideration when considering whether to abate  penalties for reasonable cause. 

Relief from Furnishing Form 1095-B to Individuals

Relief from Furnishing Form 1095-B to Individuals 

Due to the individual mandate penalty being reduced to zero starting in 2019, an individual does not need the  information on Form 1095-B in order to complete his or her federal tax return. Therefore, the IRS is granting  penalty relief for employers who fail to furnish a Form 1095-B to individuals, provided that the reporting entity: 

  1. Posts a notice prominently on its website stating that individuals may receive a copy of their 2020 1095-B upon request, accompanied by an email address and a physical address where the request can be sent. The notice must also include a phone number individuals can use to contact the reporting entity with questions; and 
  2. Furnishes an individual with a Form 1095-B within 30 days of a request.

Note that Applicable Large Employers (ALEs) are still required to furnish Form 1095-C to their full-time  employees. They must also complete Part III if the employee is enrolled in self-insured coverage. The relief  from furnishing Form 1095-B does not extend to IRS reporting. Forms 1095-B must still be submitted to the  IRS, as applicable.  

In general, this relief from furnishing Form 1095-B applies to insurers, and non-ALEs that sponsor self-insured  plans, as they complete Form 1095-B for covered participants.

Extension of Good-Faith Relief (Final Year)

As with calendar year 2015 – 2019 reporting, the IRS will not impose penalties on employers that can show  that they made good-faith efforts to comply with the requirements for calendar year 2020. In determining  good faith, the IRS will consider whether employers have made reasonable attempts to comply with the  requirements (e.g., gathering and transmitting the necessary data to an agent or testing its ability to transmit  information) and the steps that have been taken to prepare for next year’s reporting. The Notice indicates that  the good-faith relief was intended to be transitional relief, and therefore 2020 is the last year the IRS intends to  provide this relief. 

Note that the good-faith relief applies only to furnishing and filing incorrect or incomplete information, and not  to a failure to timely furnish or file. However, if an employer is late filing a return, it may be possible to get  penalty abatement for failures that are due to reasonable cause and not willful neglect. In general, to establish  reasonable cause the employer must demonstrate that it acted in a responsible manner and that the failure  was due to significant mitigating factors or events beyond its control. The IRS has been enforcing late filing  penalties via Letter 972CG, which may include penalties based on failed to file electronically (when required), or  failure to file with correct TIN information.  

As in past years, individuals can file their personal income tax return without having to attach the relevant Form  1095. Taxpayers should keep these forms in their personal records, even though the federal individual mandate  penalty is not applicable for the 2020 filing year. 

The information contained herein should be understood to be general insurance brokerage information only and does not constitute  advice for any particular situation or fact pattern and cannot be relied upon as such. Statements concerning financial, regulatory or  legal matters are based on general observations as an insurance broker and may not be relied upon as financial, regulatory or legal  advice.  

Updated as of 10/05/2020.

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