Get ACA Reporting Right and Avoid Fines

Applicable large employers face a familiar but unforgiving task each winter: reporting their group health coverage details to the IRS. With key ACA Affordable Care Act filing deadlines falling in early 2026, employers with 50 or more full-time equivalent employees should already be reviewing records, reconciling data and preparing required forms to avoid penalties.

ACA reporting is largely about accuracy and timing, and problems often stem from waiting too long to pull information together. Here’s how to get it right and avoid penalties.

Who must report and why

An applicable large employer, or ALE, is generally an employer that averaged at least 50 full-time employees, including full-time equivalents, during the prior calendar year. Employers that met that threshold in 2025 must comply with ACA employer shared responsibility reporting in 2026.

ALEs must report whether they offered minimum essential coverage to full-time employees and whether that coverage met affordability and minimum value standards. The IRS uses this information to determine whether an employer must pay a penalty for failing to meet these requirements and to verify employees’ eligibility for premium tax credits if they purchase their own health insurance on the ACA marketplace.

The required forms

ACA reporting for ALEs revolves around two forms:

1. Form 1095-C — This form must be furnished to each full-time employee, regardless of whether the employee enrolled in coverage. The form reports the health coverage offered, if any, for each month of the year.

2. Form 1094-C — This form is filed with the IRS and serves as a summary transmittal of all 1095-C forms. Form 1094-C aggregates employer-level data, including employee counts and whether the employer is part of an aggregated group.

Due date: Employers must file paper Forms 1094-C and 1095-C with the IRS on or before March 2 for firms eligible to file on paper and electronically on or before March 31, and no additional extensions are available. Employers that file a combined total of 10 or more information returns must file electronically.

Prepare

The most common ACA reporting issues trace back to incomplete or inconsistent data. Employers can reduce risk by preparing well in advance:

• Confirm 2025 full-time and full-time equivalent counts to ensure ALE status was correctly determined.
• Review payroll, time-tracking and benefits systems to ensure hours worked, eligibility and coverage offers align.
• Verify employee names and Social Security numbers.
• Confirm monthly employee contributions for the lowest-cost, self-only plan that provides minimum value.
• Review affordability calculations using the 2026 affordability threshold of 9.96%.

Be aware that hybrid and remote work arrangements can complicate efforts to track employee hours and determine eligibility. Make sure your system accurately captures hours worked regardless of the employee’s location.

Potential penalties for noncompliance

Late, incomplete or incorrect filings can trigger penalties under Internal Revenue Code Sections 6721 and 6722 for failure to file correct information returns and failure to furnish correct payee statements. Penalties generally apply per form and can add up quickly.

Separately, inaccurate reporting can expose employers to employer shared responsibility assessments if at least one full-time employee receives a premium tax credit through a marketplace. For 2026:

• The penalty is $3,340 per full-time employee, excluding the first 30 employees, if coverage was not offered to at least 95% of full-time employees and dependents.
• The penalty is $5,010 per affected employee if coverage was offered but was unaffordable or failed to meet minimum value, and the employee received a premium tax credit.

Bottom line

ACA reporting is not just a new year task. Employers that reconcile data throughout the year, confirm affordability calculations and review forms before deadlines are far less likely to face penalties or IRS follow-up.

Preparation should be well underway in January. Waiting until February often leaves too little time to fix errors before the March filing deadlines arrive.