Form 1095-C is often treated as a routine HR task. In reality, it is a high-stakes financial filing that can expose your company to significant IRS penalties if mishandled.
The IRS uses this form to determine whether your organization owes Employer Shared Responsibility Payments. Approaching it as a “check-the-box” exercise puts your cash flow at risk. With deadlines approaching, now is the time to ensure your reporting strategy is solid
Why 1095-C Errors Are More Expensive Than Ever
According to the IRS 2025 update on Section 4980H, penalty amounts have reached record levels:
Penalty “A” (failure to offer coverage to at least 95% of full-time employees): $2,970 per employee (after the first 30)
Penalty “B” (failure to offer affordable coverage): $4,460 per employee who receives a premium tax credit
For a mid-sized organization, a single systemic error can quickly escalate into six-figure exposure.
Increased Scrutiny from the IRS
Compliance is no longer manual or forgiving.
Research from Deloitte’s 2025 Tax Transformation Trends shows that middle-market companies are spending 15% more on tax compliance technology than in 2023. The reason: automated IRS data matching is faster, stricter, and more accurate than ever.
Any discrepancy between what you report and what an employee claims on their tax return is now flagged almost immediately.
Just as 1099 season reveals weaknesses in accounts payable, Form 1095-C exposes structural issues in your benefits plan.
The IRS does not evaluate intent — only compliance. If your benefits “infrastructure” fails to meet federal standards, penalties follow.
Are You Certain You’re Not an ALE?
If your company has 50 or more full-time equivalent employees, you qualify as an Applicable Large Employer (ALE).
A common misconception:
“We only have 45 full-time employees, so we’re exempt.”
Not necessarily. Two part-time employees working 15 hours per week equal one full-time equivalent. If total combined hours push you past the threshold, ACA obligations apply — whether you planned for them or not.
The Real Risk: Affordability Testing
For 2025 coverage, the affordability threshold is 9.02% of an employee’s income.
If your lowest-cost health plan exceeds this threshold and an employee receives a subsidy through the marketplace, a Penalty “B” is triggered. This is where even small miscalculations can become costly.
Most IRS Letter 226-J penalty notices originate from incorrect affordability or eligibility coding — sometimes due to just one missed month of coverage.
Key Deadlines You Must Consider (2026 Filing)
Provide Form 1095-C to employees: Early March (expected March 2, 2026)
Electronic filing with the IRS: March 31, 2026.
Since the electronic filing threshold was reduced to 10 total forms, virtually every ALE must file electronically using compliant software or a specialized provider.
The CFO’s Role: Data Integrity Before Submission
Accurate 1095-C reporting depends on a clean “three-way match”:
Payroll data
Benefits enrollment data
HRIS records
CFOPro, LLC
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Maria Rust, CPA Strategic CFO Advisor | Managing Principal
- February 11, 2026
- (407) 624-5525
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