The 2015 Instructions for Forms 1094-C and 1095-C tell Applicable Large Employers how to furnish and file corrections to incorrectly filed Forms 1095-C. They don’t answer these two questions that arise between the March 31, 2016 deadline for furnishing Forms 1095-C to full-time employees and the May 31 paper filing deadline or the June 30 e-filing deadline.

• What if I realize after March 31 that I miss-classified someone as a 2015 part-time employee or contractor?
• What if I properly classified a 2015 full-time employee but gave her a Form 1095-C with incorrect codes on Line 14 or Line 16?

Are you assessable for the $250 penalty provided by 26 U.S.C. § 6722 even if you fix the problem before you file? And how do you fix the problem? Let’s begin with that Code section.

Section 6722 imposes that penalty for failing to furnish the Form 1095-C by March 31 or for including “incorrect information” on a timely Form 1095-C, with these exceptions.

• The penalty is $50 if either mistake is corrected within 30 days of the March 31 deadline, and $100 if corrected by August 1, 2016.
• If Form 1095-C was furnished timely but with good faith data mistakes, and if those mistakes are corrected by August 1, then the penalty for the first 10 corrected Forms is waived.

Even these penalties may be waived, as the IRS has said repeatedly in FAQ guidance, such as here:

[Q3] […] Accordingly, the IRS will not impose penalties under sections 6721 and 6722 on ALE members that can show that they have made good faith efforts to comply with the information reporting requirements.

[Q32] Does Notice 2016-04 affect the rules of sections 6721(b) and 6722(b) concerning the reduction of penalty amounts for issuers that make corrections by August 1? Yes. Because the deadlines under sections 6055 and 6056 for furnishing ACA statements to individuals and filing ACA information returns with IRS have been extended as described above in Q&A #18, the August 1, 2016 deadlines for reduction in penalty amounts to correct the failures described in sections 6721(a)(2) and 6722(a)(2) also are extended. For statements furnished to individuals under sections 6055 and 6056, any failures that reporting entities correct by April 30 and October 1, 2016, respectively, will be subject to reduced penalties. For returns filed on paper with the IRS under sections 6055 and 6056, any failures that reporting entities correct by June 30 or November 1, 2016, respectively, will be subject to reduced penalties. For returns filed electronically with the IRS under sections 6055 and 6056, any failures that reporting entities correct by July 30 or November 1, 2016, respectively, will be subject to reduced penalties. These extended dates have no effect on the penalty relief described in Q&A #3, above, for incomplete or incorrect returns filed or statements furnished to employees in 2016 for coverage offered in calendar year 2015.

If you tried hard but goofed a little, and fixed it, the IRS seems to be in an understanding mood, this first reporting year. Beware, however: because the regulations (26 CFR § 301.6722(b)(2)(i)) say that a dollar amount error is “never inconsequential,” Line 15 errors may not receive as much sympathy as Line 14 and Line 16 errors.

So now, how about “how”? Where is the guidance? There’s not much. Piecing together what we can read on related topics, we suppose that the IRS expects the ALE to furnish the correction as it furnished (or should have furnished) the original. But what if the original e-notice to the employee bounced back? Our guess is that the IRS would want you to furnish the correction by mail or in person, unless the employee has provided a new, valid e-mail address.

We are aware of no requirement that the employer explain separately what error was made, why it was made, or how it has been corrected. Furnishing the corrected Form seems sufficient.

We would like to see current, directly applicable IRS guidance on this, because the question is being frequently asked.

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