Congratulations are certainly in order and we hope that you invested an appropriate amount of time celebrating the successful submission of Forms 1094 and 1095 to the IRS. It was no small feat and you (and/or your clients) should feel quite proud of your accomplishments, especially given that 2015 ACA Reporting represented the single largest IRS reporting requirement since the introduction of Form W2 over 70 years ago. So, give yourselves a round of applause, sit back, and have a nice, celebratory drink. Although it is quite unlikely, the IRS should be the ones footing the bill for the aforementioned drink because you and your clients played a rather large role in helping the IRS Beta Test their recently launched ACA Reporting software. For those of you unfamiliar with this term, a Beta Test, is a field test of the beta version of a product (as software) especially by testers outside the company developing it that is conducted prior to commercial release. In practical and admittedly simplistic terms, when any software is developed, it should go through a series of tests: Unit; System; Integration; Regression; User Acceptance; Alpha; and finally Beta Testing. A Beta Test is typically the very last validation of software that is performed by a large population just before it is formally launched for mass consumption and utilization. At the risk of giving too much credit to our US government, it is my belief that the Internal Revenue Service used 2015 ACA Reporting as a nation-wide Beta Test of their newly developed software and processes. Of course, they will never admit that to be the case, but, in hindsight, it may have been a very smart and calculated strategy. Here is some of the history that led me to this theory…
- Initial Launch of Healthcare.gov – By most everyone’s definition, healthcare.gov was a disaster. The website was full of bugs, had more downtime than uptime, and was thoroughly lambasted by pretty much everyone. The WSJ once described the launch as, “a rushed and sloppy activity with poor oversight that didn’t meet the agency’s standards. The site launched in 2013 with many problems that initially crippled enrollments by consumers.” Any technology that ‘cripples’ the intended outcome will most certainly be dubbed a disaster and should serve as a learning for future software rollouts.
- ACA Reporting Notices. From the moment the IRS established deadlines for Year 1 of ACA Reporting, they used the following verbiage to ensure that year 1 would have high participation but with appropriate escape hatches, “the IRS will not impose penalties….for entities that can show that they have made good faith efforts to comply with the information reporting requirements.” In other words, you must submit to help us test our software, but we won’t penalize you if you (or we!) foul up the filing.
- IRS Initially Extends ACA Filing Deadline. Whether it was part of the original master plan or not, the extended deadline removed considerable pressure on employers and the IRS. As with any software launch, it is always good to have a little buffer built into the schedule. In following my Beta Test theory, by extending the deadline they allowed their testers (employers) more time to complete their task and the IRS appeared as the ‘bearer of good news’ for a change.
- Further IRS Extension. This announcement from last week was final confirmation for me that 2015 may have served as an IRS Beta Test. In this announcement, the IRS states, “The ACA Information Returns (AIR) system will remain up and running after the [June 30, 2016] deadline. If you are not able to submit all required ACA information returns by June 30, 2016, please complete the filing of your returns after the deadline.”
To put the above timeline into layman’s terms: Submit your returns. Please submit your returns. Wait, you have a bit more time to submit. Heck, we’ll give you even more time to submit. And, as long as you used ‘good faith effort’ to submit, you’ll be fine. Thank you for your assistance! As noted above, from a strictly software development standpoint, their strategy was pretty smart. In the end, the Beta Test probably achieved a 99% success rate – 99% of ALEs went through the process, tested out the forms, provided feedback, tested out their software, provided feedback, learned more about ACA along the way and were afforded extended time to perform the aforementioned tasks. The reward for those employers that participated in the Beta Test and put forth a ‘good faith effort’? No imposed penalties or fines and, hopefully, a cleaner process in Year 2. While that may be well and good, I’m betting most employers would have preferred the IRS’ round of drinks!