What You Need to Know About Letter 5699
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What Is Letter 5699?
Letter 5699, Missing Information Return Form 1094/1095-C, is used to make initial contact with an organization that the IRS believes may have been an Applicable Large Employer (ALE), and therefore required to file information returns under the Affordable Care Act (ACA). As a reminder, under the ACA’s Employer Mandate, ALEs, employers with 50 or more full-time employees and full-time-equivalent employees, are required to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets Minimum Value (MV) and is affordable for the employees.
Failure to offer healthcare coverage as mandated by the ACA yields penalties under Internal Revenue Code section 4980H, which can be as much as $3,860 per employee in 2020. But, the IRS can levy additional penalties for those ALEs that fail to file Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Return, and Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, with the IRS. Such penalties can be extremely serious. For Forms 1094/1095-C due from certain large businesses and government entities in 2021 that are filed up to no more than 30 days late, the IRS may levy a penalty of $50 per information return, up to a maximum penalty of $565,000. This increases to $280 per return, up to a maximum penalty of $3,392,000 if the information returns are filed after August 1. Needless to say, addressing a Letter 5699 quickly and strategically is critical.
What Are the Options for Responding to a Letter 5699?
Letter 5699 gives the employer choices regarding their filing situation. The letter asks the employer whether they:
- Filed the forms under a different EIN. (They are asked to provide the name, EIN, and date for when the returns were filed.)
- Should have filed the forms, but did not. (They are asked to either submit the delinquent forms with the response, or provide an explanation of when the returns will be electronically submitted.)
- Were not an ALE, and thus not required to file.
- Had an “other” reason to not file.
If you are unsure which scenario applies to you, contact a vendor with a proven track record in ACA compliance. Trusaic can perform a cost-free ACA Penalty Risk Assessment to help you get started.
What Can We Expect from the IRS in Q4 of 2020?
During the first week of September, the Ogden office began issuing IRS Letters 5699 for tax year 2018 to non-filers. We see this as a signal that the IRS will soon begin issuing penalty letters (such as IRS Letter 226J) for non-compliance with the ACA. (Note that the IRS began issuing Letter 226J penalty notices for the 2017 tax year in June 2019.)
To learn more about ACA compliance in 2020, click here.
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