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To avoid costly IRS audit, respond to pings from ACA exchange

The failure of the new Congress and administration to fulfill on the pledge to repeal and replace the Affordable Care Act undoubtedly leaves many with "question mark" text bubbles dancing in their heads. Republicans in Washington say the issue is not dead, but for now, the existing law remains in place.

Because of that, experts say now is not the time to turn a blind eye when the government informs you that you are in violation of ACA provisions. Failure to comply could mean an IRS audit, which could be costly to a Minnesota or Wisconsin business, so swiftly responding to notices is recommended.

Those with experience in this relatively young area of the law know that when a company receives an exchange notice, it typically means it is considered a large employer as identified under the ACA and that one of its employees has applied for health coverage through the health care exchange. Large employers are supposed to offer coverage to workers that meets minimum standards and is "affordable."

If a worker at a big enough company receives a premium tax credit to put toward exchange coverage, the employer is required to share some of the cost by paying a penalty to the IRS. That's when notice goes out. Fortunately, there are ways to successfully appeal notices and show that the business has complied with the law. Following are a few key suggestions.

  1. Swift response. Quick action after receiving notice helps stall possible adverse audit action down the road.
  1. Keep solid employee records. Complete and accurate data rules the day. It also should be in an easy-to-access database format that can generate clear reports showing hour and payroll information by employee.
  1. Enlist third-party help. If collection and analysis of employee data is outside of your wheelhouse, turn to a reliable outside expert for help. They can generate necessary reports while you and your workers focus on conducting business.
  1. Stay responsive. Appeals can take time. Help them along by adopting an attitude of providing more information as opportunities present themselves.

Health care might seem to be a realm apart, but IRS involvement under the law keeps it in on tax turf.

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