IRS Reporting for Staffing Firms: 1094-C and 1095-C Explained

Every February and March, staffing agencies across the country sit down to file the two forms that tell the IRS whether they complied with the ACA employer mandate all year. Get the forms right, and you’ve documented your compliance and moved on. Get them wrong — wrong codes, missing employees, incorrect employer data — and you’ve handed the IRS exactly what it needs to send you a penalty notice in two years’ time.

For staffing firms, ACA information reporting is harder than it is for most employers. You have more employees. Many of them are variable-hour. Workers join and leave throughout the year. Assignments end mid-month. The interplay between initial and standard measurement periods means some workers are eligible for different months than others. And if you’re operating across multiple states, you may have additional state-level filing obligations stacked on top of federal requirements.

This guide walks through both forms — 1094-C and 1095-C — with detail on what each section requires, the coding that trips up staffing firms most often, and the filing deadlines you can’t miss.

Overview of ACA Reporting Requirements

Who Must File 1094-C and 1095-C

Any Applicable Large Employer — an employer with 50 or more full-time equivalent employees during the prior calendar year — must file both forms annually. The forms report information for the prior calendar year. So forms filed in early 2027 report coverage activity that occurred during 2026.

Form 1094-C is the transmittal form — one authoritative version is required per ALE. Form 1095-C is the employee-level form — one per full-time employee, and one per any employee who enrolled in self-insured coverage (even if not full-time).

The threshold matters: staffing agencies that hover around 50 employees need to recalculate their ALE status every year. Your status for 2026 is based on your 2025 headcount. If you were an ALE in 2025, you file for 2026 even if your headcount has dropped.

Annual Filing Deadlines

The IRS Instructions for Forms 1094-C and 1095-C set the following deadlines for 2026 reporting (covering tax year 2025):

Obligation	Deadline
Furnish Form 1095-C to employees (or post notice on website)	March 2, 2026
File Forms 1094-C and 1095-C with IRS (paper)	March 2, 2026
File Forms 1094-C and 1095-C with IRS (electronic)	March 31, 2026

And for 2027 reporting (covering tax year 2026):

Obligation	Deadline
Furnish Form 1095-C to employees	January 31, 2027
File with IRS (paper)	February 28, 2027
File with IRS (electronic)	March 31, 2027

Electronic filing is mandatory for employers filing 10 or more forms — which covers virtually every staffing agency subject to the mandate. Paper filing is a relic for most ALE members.

A newer option for employee furnishing: per updated IRS rules, employers can meet the employee furnishing requirement by posting a notice on their website stating that 1095-C forms are available upon request, as long as the notice is posted by the furnishing deadline and maintained through October 15 of the filing year. Employees who request a copy must receive it within 30 days.

Transmittal Form Basics

Form 1094-C is the cover sheet that the IRS uses to identify you and summarize your employer-level information. Every ALE must file exactly one Authoritative Transmittal — the 1094-C checked as authoritative on Line 19.

Key sections of the 1094-C:

Part I (Lines 1–8): Employer identification — name, address, and EIN. Make sure this matches exactly what appears on your 1095-C forms. Discrepancies create processing errors.

Line 19: Check this box to designate the Authoritative Transmittal. Only one 1094-C per ALE gets this designation.

Part II (Lines 20–22): Number of 1095-C forms filed (Line 20), total employee count per month (Line 22). Line 22 is where errors occur — it asks for full-time employee counts and total employee counts for each month of the year.

Part III (Lines 23–35): ALE member information, including whether you offered minimum essential coverage to at least 95% of your full-time employees each month (the All 12 Months checkbox, or a month-by-month entry if coverage wasn’t consistent all year).

Part IV: Aggregated ALE group information. If your staffing agency is part of a controlled group — multiple related entities treated as a single employer for ACA purposes — Part IV requires identifying all members of the group.

Aggregated ALE Group Reporting

This is where staffing holding companies often run into trouble. If two or more related entities together average 50+ full-time equivalents, all of them are ALEs — even if each entity individually falls below 50. Each entity must file its own Authoritative Transmittal, but Part IV of each 1094-C requires listing the other members.

Multiple related staffing brands operating under a common parent, or a staffing agency and its professional employer organization affiliate, may be a controlled group without realizing it. The controlled group determination follows Section 414 of the IRC — the same rules used for retirement plan purposes.

Getting this wrong can result in an entire entity escaping the mandate while actually being subject to it, only to discover the exposure years later when the IRS runs its cross-references.

Understanding Form 1095-C

Form 1095-C is where the real information lives. One form per full-time employee (and per self-insured enrollee, even if not full-time), it tells the IRS exactly what you offered, to whom, for which months, and at what cost.

Part I: Employee Information

Lines 1–13 capture identifying information:

• Lines 1–6: Employee name, Social Security Number, and address. SSN accuracy is critical — the IRS matches 1095-C data against individual tax returns using SSNs. An incorrect SSN means your offer of coverage doesn’t credit against the employee’s marketplace subsidy claim.

• Lines 7–13: Employer information — name, EIN, and address. Again, must match the 1094-C exactly.

One staffing-specific issue: for workers on assignment at client sites, the employer address should be the staffing agency’s address, not the client’s. The agency is the ALE, and the form reflects the agency’s obligation.

Part II: Offer of Coverage Codes

Lines 14–16 are the core of the 1095-C. They describe your coverage offer, employee contribution amount, and whether any safe harbor provisions apply. Coding errors here are the most common trigger for Letter 226-J penalty notices.

Line 14 — Offer of Coverage

Line 14 requires a code for each month of the year (or an “All 12 Months” entry if the same code applies all year). The code describes what you offered — not what the employee chose.

Key codes and when to use them in a staffing context:

Code	Meaning	When It Applies for Staffing
1A	Qualifying Offer — MEC providing minimum value to employee + spouse + dependents, at or below FPL single affordability	Full-coverage offer meeting all ACA standards
1B	MEC + MV to employee only (not spouse/dependents)	Employee-only minimum value coverage
1E	MEC + MV to employee, spouse, and dependents	Full family minimum value offer
1F	MEC to employee but NOT providing minimum value	MEC-only plan (preventive care only) — protects from (a) penalty, not (b)
1H	No offer of coverage	Worker in initial measurement period, worker not yet full-time, or no offer was made

Code 1H is the most dangerous code in staffing. It means no compliant offer was made for that month. Using it correctly — for workers in measurement periods who aren’t yet eligible — is fine. Using it incorrectly for workers who were in a stability period and should have had an active offer is a penalty trigger.

Line 15 — Employee Share of Lowest Cost Monthly Premium

Line 15 shows the monthly premium amount the employee would have had to pay for the lowest-cost plan that provides minimum value and covers only the employee. This is used by the IRS to determine affordability.

Leave Line 15 blank if code 1A was used on Line 14, or if code 1H was used.

Line 16 — Section 4980H Safe Harbor

Line 16 explains why the employer isn’t responsible for a penalty for a given month, even if the employee isn’t covered. Safe harbor codes:

Code	Meaning
2A	Employee not employed during the month
2B	Employee not full-time for the month
2C	Employee enrolled in the offered coverage
2D	Employee in a limited non-assessment period (including initial measurement period)
2E	Multi-employer plan relief
2F, 2G, 2H	Affordability safe harbors (W-2, FPL, Rate of Pay respectively)

For staffing, codes 2B and 2D will appear frequently. 2D is particularly important — it marks months during which a variable-hour employee is in their initial measurement period and not yet subject to the mandate. As long as you’re using 2D correctly, you’re not penalized for not offering coverage during that window.

Part III: Covered Individuals

Part III is only required for self-insured plans — plans where the employer (or a plan entity closely related to the employer) bears the claims risk. Most staffing firms use fully insured plans, so Part III is often left blank.

If your firm uses a self-insured MEC or MVP plan, Part III must list each individual (employee and enrolled dependents) who was actually enrolled in coverage, month by month.

Common Filing Mistakes for Staffing Firms

Incorrect Offer Codes

Using 1H when a worker was in a stability period and should have been offered coverage is the most common and consequential error. It signals to the IRS that no offer was made — which, if the employee received a marketplace subsidy, triggers the 4980H(a) or 4980H(b) penalty calculation.

The reverse error — using 1E (full family offer) when you only offered employee-only coverage — overstates what you provided and can create issues if the offer was deemed unaffordable at the family level.

Missing or Inaccurate Employee Data

Social Security Number errors are common in staffing because of high workforce volume. The IRS matches 1095-C data against individual tax returns by SSN — if the number is wrong, your compliance documentation doesn’t connect to the employee’s record.

Name/SSN mismatches are an IRS-defined “specific error” that can result in penalties. The IRS’s ACA reporting penalty for failure to file a correct return is $340 per form (for errors not corrected before August 1). For a staffing agency filing 300 forms with 50 SSN errors, that’s $17,000 in information reporting penalties — before any employer mandate penalties are considered.

Transition Period Errors

Workers in their initial measurement period are in what the IRS calls a “limited non-assessment period” — you’re not liable for an employer mandate penalty while you’re figuring out if they’re full-time. But you have to code this correctly on Line 16 (using code 2D) for the IRS to recognize it.

The transition from the initial measurement period to the standard measurement period is another source of errors. During the transition, a worker might be in their first stability period (based on the IMP) at the same time the standard measurement period is running. Coding their status incorrectly during this overlap can create phantom exposure.

Responding to IRS Letters

Letter 226-J Response Process

When the IRS determines that a penalty may be owed, it sends Letter 226-J. The letter arrives roughly two years after the tax year in question, cross-referencing your 1094-C/1095-C data against employee tax returns showing marketplace subsidies.

As of January 2025, you have at least 90 days to respond — a significant improvement from the previous 30-day window, enacted through the Employer Reporting Improvement Act. Use the full time.

The letter includes:

• An ESRP Summary Table showing penalty calculations by month

• Form 14764 (your response indicating agreement or disagreement)

• Form 14765 (the Premium Tax Credit Listing — employees who triggered the assessment)

Response steps:

1. Pull your original 1095-C data for the tax year in question

2. Compare your records against the employees listed on Form 14765

3. Verify whether coverage was actually offered for each employee listed — and whether your 1095-C coding accurately reflected that

4. If coverage was offered but coded incorrectly, prepare corrected 1095-C forms

5. Submit Form 14764 with your agreement or disagreement, and attach documentation supporting your position

Many Letter 226-J assessments are reduced or eliminated through the response process because the IRS’s penalty calculation is based on information returns — and staffing firms often have proof that coverage was offered, even when the coding was wrong.

Correcting Filing Errors

If you discover errors in previously filed 1095-C forms — whether through a 226-J response or a self-audit — you can file corrected forms. Indicate the correction by checking the CORRECTED box at the top of Form 1095-C.

Filing corrected forms promptly reduces information reporting penalties. Per ADP SPARK’s analysis of 2026 penalty amounts, correcting errors before April 30 results in a $60 per form penalty. Correcting between May 1 and July 31 is $130 per form. Errors corrected after August 1 are $340 per form.

Getting ahead of errors through proactive self-audits — rather than waiting for the IRS to find them — saves both money and time.

Simplifying Reporting with Technology

Automated Data Collection

The root cause of most 1095-C coding errors is a data collection problem. If your HR or payroll system doesn’t capture offer-of-coverage events by month — specifically, whether coverage was offered, at what cost, and what the employee’s response was — you can’t produce accurate Line 14, 15, and 16 entries.

Building the data collection infrastructure should happen throughout the year, not in January when you’re staring down a filing deadline. Systems that track:

• Measurement period start and end dates per employee

• Administrative period deadlines

• Stability period status

• Specific offer events (date, plan offered, employee contribution)

• Enrollment decisions (accepted, declined, enrolled)

…can generate 1095-C codes automatically and flag exceptions for human review.

Integration with Benefits Administration

Benefits in a Card’s BenefitSync API integrates directly with staffing platforms to pull hours data, track eligibility events, and maintain enrollment records in sync with your timekeeping and payroll systems. When it’s time to file 1095-C forms, the data you need is already organized — you’re not reconstructing a year’s worth of coverage decisions from disparate sources.

That kind of integrated recordkeeping also creates the audit trail the IRS requires employers to maintain for six years (per the Employer Reporting Improvement Act’s extended statute of limitations). A well-integrated system isn’t just a filing convenience — it’s a defensible compliance record.

ACA reporting isn’t glamorous, and for most staffing firms it feels like administrative overhead with no business upside. But filing accurate 1094-C and 1095-C forms is what stands between you and Letter 226-J. The forms you submit become the evidence the IRS uses — either for or against you — when it evaluates your compliance. Filing them correctly, on time, with accurate codes, is the most direct way to stay out of IRS trouble.

References

1. Internal Revenue Service, “Instructions for Forms 1094-C and 1095-C (2025),” IRS.gov. https://www.irs.gov/instructions/i109495c

2. Internal Revenue Service, “Questions and Answers About Information Reporting by Employers on Form 1094-C and Form 1095-C,” updated September 13, 2025. https://www.irs.gov/affordable-care-act/employers/questions-and-answers-about-information-reporting-by-employers-on-form-1094-c-and-form-1095-c

3. Selerix, “ACA 1095-C Codes Cheat Sheet: Guide for Employers,” July 31, 2025. https://selerix.com/blog/aca-codes/

4. ACAwise, “ACA Form 1095-C (Line 14 & 16) Codes Cheatsheet,” December 19, 2025. https://www.acawise.com/aca-form-1095-c-line-14-16-code-cheatsheet/

5. Selerix, “Guide to Understanding the Form 1094-C.” https://selerix.com/wp-content/uploads/2025/01/Understanding-the-Form-1094-C.pdf

6. ADP SPARK, “Understanding Health Plans, Year-End ACA Action Items and Employer Mandates for 2025/2026,” November 17, 2025. https://www.adp.com/spark/articles/2025/11/understanding-health-plans-yearend-aca-action-items-and-employer-mandates-for-20252026.aspx

7. Trusaic, “ACA Filing Checklist for 2026: What Employers Should Prepare for Now,” December 17, 2025. https://trusaic.com/blog/aca-filing-checklist-for-2026-what-employers-should-prepare-for-now/

8. Plante Moran, “Failure to Comply with ACA Information Reporting Requirements Can Result in Significant Penalties,” January 15, 2026. https://www.plantemoran.com/explore-our-thinking/insight/2026/01/failure-to-comply-with-aca-information-reporting-requirements

9. Frier Levitt, “ACA Reporting Compliance Eased for 2026,” January 7, 2026. https://www.frierlevitt.com/articles/aca-reporting-compliance-relief-2026/

10. Benefitfocus, “ACA Penalties — What You Need to Do When You Receive Letter 226-J.” https://www.benefitfocus.com/sites/default/files/resources/ACA%20Penalties%20What%20You%20Need%20to%20Do%20When%20You%20Receive%20Letter%20226J.pdf