IRS Eases Healthcare Coverage Reporting Requirements

Federal regulators are easing healthcare coverage reporting requirements for the 2025 tax year, changing how employers and insurers deliver key tax forms to individuals. The update reflects a broader push to reduce paperwork while expanding electronic filing under Affordable Care Act reporting rules.

New Rules Allow Notice-Based Delivery for ACA Forms

Employers and coverage providers can now move away from automatically mailing Forms 1095-B and 1095-C. Under IRS Notice 2025-15, reporting entities may use a “notice and request” method by posting an online message that individuals can request their forms if needed.

This shift follows the Paperwork Burden Reduction Act and marks a practical change in how healthcare coverage reporting is handled. Instead of sending forms to all recipients, organizations can wait until a request is made, provided they follow timing requirements. The approach is designed to reduce printing and mailing costs while still ensuring access to required tax documents.

For the 2025 tax year, requested forms must still be furnished by January 31, 2026, or within 30 days of the request. The updated IRS instructions for Forms 1095-B and 1095-C formally adopt this approach as part of standard ACA reporting compliance, meaning organizations must still maintain accurate records and be ready to respond promptly.

Lower E-File Threshold Expands Digital Filing Requirements

The electronic filing threshold remains at 10 total information returns, continuing a rule introduced under earlier Treasury and IRS regulations. This requirement applies to healthcare coverage reporting for the 2025 tax year and significantly broadens the number of entities required to file electronically.

As a result, more employers and insurers must submit ACA reporting through the IRS Affordable Care Act Information Returns system. The AIR platform operates separately from other IRS systems and requires specific data formatting and transmission standards that may be unfamiliar to smaller filers.

Updated AIR schemas and business rules for 2025 have already been released. Payroll providers and compliance teams are expected to test their systems early to avoid delays or rejected submissions during filing season, particularly as electronic filing becomes the default method for most organizations.

Employers Must Continue Meeting ACA Reporting Standards

The underlying structure of healthcare coverage reporting remains unchanged. Sections 6055 and 6056 still define reporting responsibilities and determine which forms organizations must file, ensuring that ACA compliance remains consistent despite procedural updates.

These rules continue to support enforcement of key Affordable Care Act provisions. The IRS relies on reporting data to monitor employer coverage offers, track minimum essential coverage, and verify eligibility for premium tax credits.

Applicable Large Employers Still File Form 1095-C

Applicable large employers, generally those with at least 50 full-time employees or equivalents, must continue filing Form 1094-C and Form 1095-C. These forms document whether employers offered affordable, minimum-value coverage to employees and their dependents.

The IRS uses this data to enforce employer-shared responsibility rules. Accurate reporting is essential, as errors in coverage offers, affordability calculations, or employee counts can lead to compliance issues or trigger penalties.

Employers must also ensure that the coding on Form 1095-C aligns with the IRS's definitions of affordability and coverage. Even minor inaccuracies can result in follow-up notices or additional scrutiny.

Coverage Providers Continue Using Form 1095-B

Entities that provide minimum essential coverage but are not classified as applicable large employers typically file Forms 1094-B and 1095-B. This group includes insurers, government programs, and smaller self-insured employers.

These forms confirm that individuals had qualifying coverage during the year. While the individual shared responsibility payment is no longer enforced at the federal level, reporting still plays a role in tax administration and eligibility verification.

Marketplace coverage continues to be reported on Form 1095-A. Individuals use that form to reconcile advance premium tax credits when filing their tax returns, making accurate reporting critical for both taxpayers and regulators.

Penalties Remain in Place for Noncompliance

Enforcement tied to healthcare coverage reporting requirements remains in place. Organizations that fail to file accurate returns or furnish correct statements on time may face penalties under Sections 6721 and 6722.

For the 2025 reporting cycle, penalties start at $60 per return if corrected within 30 days and rise to $340 per return for late or unfiled submissions. Intentional disregard may result in penalties of up to $680 per return, increasing the financial risk for noncompliant organizations.

Entities required to file electronically but submitting paper returns without an approved waiver may face additional penalties. The IRS has made clear that compliance with electronic filing rules is mandatory for those who meet the threshold.

These penalties emphasize the necessity of timely and accurate reporting. Even organizations that benefit from reduced mailing requirements must still meet all filing obligations.

Businesses Adjust Systems to Meet New Reporting Rules

The shift toward notice-based delivery and expanded electronic filing is pushing organizations to update their internal systems. Employers and insurers must focus on both compliance and operational readiness as reporting requirements evolve.

Many organizations are reviewing their processes to ensure that data flows correctly from payroll, HR, and benefits systems into reporting tools. This integration is essential for meeting ACA reporting standards without errors.

Organizations Review Data and Reporting Processes

Accurate healthcare coverage reporting depends on consistent tracking of employee eligibility, enrollment periods, and affordability measures. Employers must ensure that payroll and HR systems capture this information correctly throughout the year.

Testing data against IRS AIR requirements can help prevent errors during submission. Early preparation allows organizations to identify gaps in reporting processes and make adjustments before filing deadlines approach.

Strong internal controls and regular audits can also reduce the risk of inaccurate filings. These steps are becoming more important as enforcement remains steady.

Notice-and-Request Method Requires Clear Communication

Entities adopting the notice-and-request method must ensure their websites include clear and accessible instructions for requesting Forms 1095-B or 1095-C. They must also respond promptly to requests within the required timeframe.

Failure to implement the notice correctly could create compliance risks, particularly if individuals are unable to access their forms when needed. Organizations must balance administrative relief with responsiveness.

Clear communication with employees and covered individuals can help avoid confusion. Guiding how to request forms and when to expect delivery will be an important part of successful implementation.

Sources

• Congress.gov – Paperwork Burden Reduction Act
• IRS Notice 2025-15
• IRS Instructions for Forms 1094-C and 1095-C
  

‍By William Mc Lee, Editor-in-Chief & Tax Expert—Get Tax Relief Now