Applicable Large Employers file Forms 1094-C and 1095-C each year to show the IRS what health coverage they offered their full-time workforce. To fill out and file Forms 1094-C and 1095-C, you prepare one Form 1095-C for every full-time employee (coding month-by-month what you offered, what it cost, and any safe harbor you relied on), gather those forms behind a single Form 1094-C that serves as the Authoritative Transmittal, furnish each employee their copy by January 31, and transmit the batch to the IRS through the ACA Information Returns (AIR) system by March 31. Electronic filing is mandatory for almost every ALE: if you file 10 or more information returns of any kind in the year, paper is off the table.
Who Has to File
You are an Applicable Large Employer (ALE) if you averaged at least 50 full-time employees, including full-time equivalents, on business days during the prior calendar year. A full-time employee is one who averaged 30 hours of service per week or 130 hours per month.1Internal Revenue Service. Identifying Full-Time Employees To count FTEs, add all part-time hours for the month (capping each individual at 120), divide by 120, add that to your full-time headcount, then average across the 12 months.2Internal Revenue Service. Determining if an Employer Is an Applicable Large Employer
Companies connected through common ownership or that form a controlled group under Section 414 are treated as a single employer for the 50-employee test. If the combined workforce hits 50, every entity in the group is an ALE member and files its own 1094-C and 1095-C forms.3Internal Revenue Service. Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act There is a narrow seasonal-worker exception when your overage lasts 120 days or fewer and is entirely attributable to seasonal roles; year-round headcount that already reaches 50 does not qualify.
What the Two Forms Do
Form 1095-C is the employee-facing document. You prepare one for every individual who was a full-time employee during any month of the year. It reports, month by month, what coverage you offered, what the employee would have paid for the lowest-cost self-only option, and whether the employee enrolled. Employees use it on their own returns, and the IRS uses it to check eligibility for Marketplace premium tax credits.4Internal Revenue Service. Instructions for Forms 1094-C and 1095-C
Form 1094-C is the transmittal. It travels with the batch of 1095-C forms and carries aggregate data about your organization. If you file all of your 1095-Cs in one batch, that Form 1094-C is automatically your Authoritative Transmittal. If you split the batch across multiple filings, you must designate exactly one Form 1094-C as the Authoritative Transmittal by checking Line 19; that one carries the organization-wide totals and certifications.
Filling Out Form 1095-C
Form 1095-C has three parts. Every ALE member completes Parts I and II. Part III is only for employers that sponsor a self-insured plan.
Part I: Employee and Employer Information
Part I collects the employee’s name, Social Security number, and address, along with your legal name, Employer Identification Number, and address. These details must match IRS and Social Security Administration records exactly. Mismatches between an employee’s name and SSN are one of the most common reasons a filing gets flagged. If you don’t have an employee’s SSN, you’re required to make a reasonable effort to obtain it; IRS Publication 1586 sets out the solicitation and reasonable-cause standards that apply when a TIN is missing or wrong.
Part II: Employee Offer and Coverage
Part II is the substance of the form. Three lines are completed for each of the 12 months (or once under “All 12 Months” if nothing changed across the year).
Line 14 — Offer of Coverage (Series 1 codes). This line describes what you offered the employee that month. The codes you’ll reach for most often:
- 1A (Qualifying Offer): minimum-value, self-only coverage at no more than 9.96% of the mainland federal poverty line, with an offer extended to spouse and dependents.
- 1B: minimum-value coverage offered to the employee only.
- 1C: minimum-value coverage offered to the employee and dependents, but not the spouse.
- 1E: minimum-value coverage offered to the employee, spouse, and dependents.
- 1H: no offer, or an offer that did not qualify as minimum essential coverage.
Additional codes (1D, 1F, 1G, 1J, 1K, and 1L through 1S) cover conditional spousal offers, individual coverage HRAs, and other specific situations. The complete list is in the IRS instructions.5Internal Revenue Service. Instructions for Forms 1094-C and 1095-C
Line 15 — Employee Required Contribution. Enter the monthly dollar amount the employee would pay for the lowest-cost self-only option that provides minimum value. This is the employee’s share only, not the total premium and not the cost of the plan they actually chose. If you used code 1A on Line 14, Line 15 stays blank. Pull the number directly from your benefits plan documents; a wrong figure here is the most common trigger for an affordability penalty assessment.
Line 16 — Safe Harbor and Other Relief (Series 2 codes). This line tells the IRS why no penalty applies for that month, even if something looks off:
- 2A: the individual was not your employee that month.
- 2B: the employee was not full-time that month.
- 2C: the employee was enrolled in the coverage you offered. This is the most common entry and generally the strongest protection.
- 2D: the employee was in a limited non-assessment period, such as an initial measurement period for a new variable-hour employee.
- 2F: W-2 wages affordability safe harbor.
- 2G: federal poverty line affordability safe harbor.
- 2H: rate of pay affordability safe harbor.
Code 2C takes priority over most other Series 2 codes. If the employee was enrolled for the full month, use 2C even when another code technically also applies.
Part III: Only for Self-Insured Plans
If you sponsor a self-insured plan (you pay claims directly rather than through a fully-insured carrier arrangement), also complete Part III. List every individual actually enrolled: the employee and each covered dependent, with SSNs, dates of birth, and the months of coverage.
Employers with fully-insured plans skip Part III entirely; the insurance carrier handles enrollee reporting on Forms 1094-B and 1095-B. Self-insured employers can also use Part III for non-employee enrollees such as retirees, COBRA participants, and non-employee directors, or report those individuals on Form 1095-B instead.
Filling Out Form 1094-C
Part I of Form 1094-C collects your organization’s name, EIN, address, and contact information. Line 18 reports the total number of 1095-C forms included with this particular transmittal. Line 19 is the Authoritative Transmittal checkbox.
Parts II through IV are completed only on the Authoritative Transmittal. Line 20 asks for the total number of 1095-C forms filed for the ALE member across all transmittals, not just this batch. Line 21 asks whether you were part of an Aggregated ALE Group during any month; check “Yes” if you’re part of a controlled group and list the other members in Part IV.
Part III records monthly organization-level data. Column (a) asks whether you offered minimum essential coverage to at least 95% of your full-time employees and their dependents each month. Columns (b) and (c) capture total employee and full-time employee counts by month. These aggregates are how the IRS cross-checks that the individual 1095-C forms tell a consistent story.
The Numbers That Drive the Codes
For plan years beginning in 2026, coverage is “affordable” if the employee’s required monthly contribution for self-only coverage does not exceed 9.96% of household income. The percentage is adjusted annually and was set for 2026 by Revenue Procedure 2025-25.6Internal Revenue Service. Rev. Proc. 2025-25
Because you rarely know an employee’s actual household income, the IRS allows three safe harbors: W-2 Box 1 wages (code 2F), rate of pay times 130 hours (code 2H), and the federal poverty line (code 2G). Pick the one that fits your workforce and apply it consistently.
A plan meets “minimum value” if it covers at least 60% of the total cost of medical services for a standard population and provides substantial coverage of physician and inpatient hospital services.7HealthCare.gov. Minimum Value The IRS Minimum Value Calculator verifies plan qualification. A plan that falls short of minimum value leaves you exposed to a Section 4980H(b) penalty regardless of what you offered.
Deadlines and How to Submit
Three dates govern each filing year:
- January 31: furnish each full-time employee their Form 1095-C for the prior calendar year.
- February 28: paper file with the IRS (February 29 in a leap year).
- March 31: electronic file through the AIR system.
Treat these as hard deadlines. The IRS has occasionally granted automatic extensions for the employee furnishing date in prior years, but don’t plan around one being available.
If you file 10 or more information returns of any type during the calendar year (including W-2s, 1099s, and ACA forms combined), electronic filing is required.8Internal Revenue Service. Topic No. 801, Who Must File Information Returns Electronically Practically every ALE crosses that line.
Electronic filing runs through the ACA Information Returns (AIR) system. You need an ACA Transmitter Control Code (TCC), which you apply for through the AIR program well in advance because approval takes time. Access to the production system uses ID.me. Filers can submit through the browser-based user interface or through an Application-to-Application (A2A) channel for automated transmissions. Most payroll providers and ACA compliance vendors handle the actual transmission, but accuracy of the data remains the employer’s responsibility.9Internal Revenue Service. Affordable Care Act Information Returns (AIR) Employers filing fewer than 10 total information returns may still submit on paper, sent to the IRS service center in Austin or Kansas City depending on business location.
Fixing Errors After Filing
Each AIR submission comes back with one of three statuses: accepted, accepted with errors, or rejected. A rejection means the IRS could not process the filing at all, often because of an XML schema error, an invalid TCC, or a formatting problem. Accepted with errors means the batch went through but specific records were flagged, usually for name/SSN mismatches.
To fix a 1095-C that contained wrong data, check the “CORRECTED” box at the top of a new Form 1095-C, enter the right information, and resubmit through AIR. The corrected form replaces the original. If a 1095-C was filed for someone who never should have received one, check “VOID” instead to remove the record. Corrected transmittals on Form 1094-C follow the same pattern.
Move quickly. IRS penalty tiers escalate the longer errors sit uncorrected, and submitting fixes within 30 days of the deadline carries the lowest exposure.
Penalties
Two separate penalty regimes apply. One targets the forms themselves; the other targets the underlying coverage failures the forms report.
Information Return Penalties
Sections 6721 and 6722 impose penalties for each incorrect or late return and each late or incorrect employee statement. For returns due in 2026:10Internal Revenue Service. Information Return Penalties
- Corrected within 30 days of the deadline: $60 per return.
- Corrected after 30 days but by August 1: $130 per return.
- Filed after August 1 or not filed: $340 per return.
- Intentional disregard: $680 per return with no maximum cap.
These amounts apply separately to the IRS filing and the employee statement, so one botched 1095-C can trigger two penalties: one for the copy sent to the IRS and one for the copy the employee should have received. For a large workforce, these add up quickly.
Employer Shared Responsibility Penalties
Section 4980H imposes separate penalties when an ALE fails to offer affordable, minimum-value coverage. For 2026:
- Section 4980H(a): if you fail to offer minimum essential coverage to at least 95% of full-time employees and their dependents, the penalty is $3,340 per year ($278.33 per month) for each full-time employee, minus the first 30.
- Section 4980H(b): if you offer coverage but it isn’t affordable or doesn’t provide minimum value, the penalty is $5,010 per year ($417.50 per month) for each full-time employee who receives a premium tax credit on the Marketplace.
The (b) penalty applies employee by employee. The (a) penalty applies across the workforce and is almost always the larger exposure. Forms 1094-C and 1095-C are how the IRS calculates both, which is why the coding on Lines 14, 15, and 16 carries so much weight.11Office of the Law Revision Counsel. 26 U.S. Code 4980H – Shared Responsibility for Employers Regarding Health Coverage
When the IRS believes you owe a 4980H payment, it sends Letter 226-J with a proposed assessment, a breakdown of the employees who triggered it, and a response deadline. You reply on Form 14764, agreeing and paying or disagreeing and submitting corrected data on Form 14765 (the PTC Listing).12Internal Revenue Service. Understanding Your Letter 226-J Many 226-J assessments come from coding errors rather than actual coverage failures (a Line 14 coded 1H instead of 1E, for example), and prompt corrections often resolve them.
Common Mistakes to Avoid
Mismatched employee SSNs and names cause more filing rejections than any other single issue. Run your data against Social Security Administration records before filing if your payroll system supports it. Incorrect hire and termination dates are a close second because they drive which months show an offer and which qualify for a 2A or 2B on Line 16.
Line 15 errors are the next most damaging category. The right number is the employee’s monthly share for the lowest-cost self-only option that meets minimum value. Not the family premium. Not the total premium before your contribution. Not the plan the employee actually chose. Pulling from the wrong column of your benefits schedule can make affordable coverage look unaffordable on paper, and a 226-J letter follows.
Watch for coordination gaps between HR, payroll, and benefits. The data on Form 1095-C draws from at least three systems (hours tracking, payroll, and benefits enrollment), and mismatches between them produce contradictory codes. An employee coded on Line 16 as not full-time but showing 2,080 annual hours in payroll will draw IRS attention. Reconcile the numbers across systems before you file, not after.