HIPSON INVESTMENTS

Resources · ACA Compliance · 8 min read · Updated Aug 2026

The 2026 ACA penalty guide: $3,340, $5,010, and the $680 form.

JB Justin Boulet
Principal · CFO & Payroll Services · does these filings for a living

Every year I sit across from an owner or an HR director who is absolutely certain their company is fine on the Affordable Care Act. Most of the time they are wrong about at least one number — usually because the number changed in the last twelve months and nobody told them. So here is every 2026 figure that matters, in one place, with what each one actually does to your P&L.

$3,340§4980H(a) per FT employee, per year (minus the first 30)IRS indexed amount, 2026 plan years
$5,010§4980H(b) per subsidized employee, per yearIRS indexed amount, 2026 plan years
$680Per employee for a bad 1095-C — both copies2026 information-return penalties
9.96%2026 affordability ceiling — highest everRev. Proc. 2025-25

Penalty A: the sledgehammer

If you are an Applicable Large Employer (ALE) — you averaged 50 or more full-time employees plus full-time equivalents last year — and you fail to offer minimum essential coverage to at least 95% of your full-time people, one employee taking a subsidized exchange plan triggers §4980H(a): $3,340 for every full-time employee you have, minus the first 30. A 130-person company that misses the 95% test is looking at 100 × $3,340 — $334,000 for the year. Not per incident. Per year.

Penalty B: the tack hammer

Offer coverage but make it too expensive, and §4980H(b) charges $5,010 per year for each full-time employee who takes a premium tax credit instead. "Too expensive" in 2026 means the employee's share of self-only coverage exceeds 9.96% of household income. The clean way through is the federal-poverty-line safe harbor — a rule that, if you follow it, automatically satisfies the affordability test: keep at least one self-only option at $129.89 a month or less and affordability is settled automatically for calendar-year plans. The two penalties never stack in the same month — (a) is the ceiling — but either one arrives with interest.

The paperwork penalty nobody budgets

Separate from all of the above: ALEs must file Form 1094-C and a 1095-C for every full-time employee. Furnish employee copies by March 2; e-file with the IRS by March 31 (e-filing is mandatory once you have ten or more information returns — effectively everyone). A late or incorrect form costs $340. Both the employee copy and the IRS copy count, so one employee's bad form is $680. The annual cap is $4,098,500 — and there is no cap at all if the IRS decides you disregarded the rules intentionally.

"Good-faith relief" is gone. Through 2020 the IRS forgave honest reporting mistakes. It no longer does. An incorrect form is now simply a penalty.

Why this bites years later

The IRS doesn't audit you the way you imagine. It cross-references your W-2 filings against exchange subsidy data, and two or three years later a Letter 226-J — the IRS's ACA penalty notice — arrives proposing an assessment, with the burden on you to rebut it, line by line, from records you may not have kept. The statute of limitations on §4980H penalties runs six years. I have walked a 300-life client's CPA through these rules on a call the CPA didn't know he needed; he is excellent at taxes, and this simply is not taxes.

ALE? 50+ FT + FTEAveraged over the prior year Offered to 95%+ of FT staff?Minimum essential coverage + dependents No → §4980H(a): $3,340× every FT employee after the first 30 Affordable? ≤9.96%Else §4980H(b): $5,010 / subsidized EE Separately, always:1094-C / 1095-C by Mar 2 & Mar 31 — $340/form, $680/EE The two §4980H penalties never stack in the same month; (a) is the ceiling. Filing penalties apply regardless.
Fig. 01 — the three ways 2026 charges you, and the order the tests run

What to do this quarter

Count honestly — full-time plus equivalents, using last year's monthly averages. Check your cheapest self-only premium against $129.89. Pull last year's 1094-C acknowledgment and confirm somebody actually e-filed. If any of those three checks makes you pause, that pause is worth three minutes: our free audit runs the same tests an advisor would, in your browser, and puts a dollar figure on whatever it finds.

Find your number before the IRS does. The free ACA audit takes about three minutes and nothing is stored on this site.

Run the free ACA audit

Sources & notes: IRS §4980H indexed amounts for 2026 plan years; IRS Instructions for Forms 1094-C and 1095-C; Rev. Proc. 2025-25 (9.96% affordability; $129.89 FPL safe harbor); 2026 information-return penalty schedule ($340/form; $4,098,500 cap). Educational only — not tax or legal advice. Figures change annually; this page is reviewed each Q4.