Applicable large employers, and small employers with self-funded medical plans, will be providing information to employees about their offer of health coverage. Notices to employees will be furnished on Form 1095-C for most employers, and reporting to the IRS will be accomplished through Form 1094-C.
The forms require employers to report a Social Security Number (or TIN) for the employee and each covered individual. While employers typically have an SSN for an employee, they may not have a SSN for a covered dependent.
Employers will be subject to penalties if they submit incomplete or incorrect reporting under health care reform. The IRS can impose a penalty of up to $250 per return, with a maximum penalty of $3,000,000 per year. While penalties may be waived if an employer can show “reasonable cause” for a failure, the IRS does set out specific steps that must be followed to be able to claim reasonable cause with respect to obtaining a SSN.
IRS regulations require that an employer make three attempts to obtain an individual’s SSN.
Any request that is made by mail must include a Form W-9 and a self-addressed return envelope. Postage pre-paid is not required. Telephone requests must be made to an adult member of the household and the employer must keep a record of the phone call. In either case, the individual must be informed that he or she will be subject to a $50 penalty by the IRS if he or she fails to provide a TIN.
Employers should be certain to follow the rules described above to be eligible to claim reasonable cause for not using a TIN on the health care reform filings.