The ACA Times


  Show menu
  • Home
  • Articles
  • Get to Know the ACA
  • ACA – Frequently Asked Questions
  • Resources
  • Meet the Editors
  • Trusaic
  • Contact Us
  • Legal
  
  • Home
  • Affordable Care Act
  • How to Respond to IRS Letter 226J About Affordable Care Act Penalties

Articles

How to Respond to IRS Letter 226J About Affordable Care Act Penalties

November 13, 2017 Joanna Kim-Brunetti Affordable Care Act, IRS
How to Respond to IRS Letter 226J About Affordable Care Act Penalties

It’s the letter no one wants to receive.

However, its coming and you need to be prepared just in case your company or client receives it.

It is Letter 226J, the communication that will be sent to Applicable Large Employers (ALEs), companies with 50 or more full-time or full-time equivalent employees it believes were not in compliance with the ACA for the 2015 tax reporting year. The IRS has released a sample of the letter, which you can see by clicking here.

The letter provides information on the individual employees who, for at least one month in the year, were full-time employees, were allowed a premium tax credit, and for whom the ALE did not qualify for an affordability safe harbor or other relief, as per instructions for Forms 1094-C and 1095-C, Line 16. It also provides the indicator codes for the ALE reported on lines 14 and 16 of each assessable full-time employee’s Form 1095-C.

The letter contains an ESRP summary table itemizing the proposed payment by month and indicating for each month if the liability is under section 4980H(a) or section 4980H(b).

Finally, the letter includes a response form, Form 14764, “ESRP Response,” and a description of the actions the IRS will take if the ALE does not respond in a timely manner to Letter 226J.

ALEs receiving Letter 226J need to be prepared to do the following:

  • Provide information to the IRS by the response date shown in the letter, which will be 30 days from the date the letter was issued. The letter will contain the name and contact information of a specific IRS employee that the ALE should contact if the ALE has questions about the letter.
  • Respond in writing, either agreeing with the proposed employer shared responsibility payment or disagreeing with part or all of the proposed penalty assessment. The letter will provide instructions on how the ALE should respond.
  • Request a pre-assessment conference, if the ALE disagrees with the proposed or revised ESRP payment. Following this conference with the IRS, the ALE may also ask the IRS Office of Appeals to review the case.

The IRS will acknowledge any response to Letter 226J with a Letter 227.

What happens if the ALE doesn’t respond?

The IRS will assess the amount of the proposed ESRP shown in Letter 226J, and will issue a Notice and Demand for Payment (Notice CP 220J). This Notice offers directions and alternatives to pay the penalty.

What happens if the ALE agrees with the proposed ESRP?

The ALE may complete, sign, and date the enclosed Form 14764, ESRP Response, and return it to the IRS by the response date. If the ALE doesn’t pay the entire agreed-upon ESRP, it will receive a Notice and Demand notice for the balance due.

ALEs that receive Letter 226J only will have 30 days from the date of the letter to respond. Failing to do so could lead to a significant IRS penalty assessment for your client and, possibly, an IRS audit. The time to prepare is now.

To obtain an infographic that explains the process that triggers Letter 226J and how to respond, click here.

To learn more about ACA compliance in 2021, click here.


We’re committed to helping companies reduce risk, avoid penalties, and achieve 100% ACA compliance. For questions about the ACA contact us here.

Summary
How to Respond to IRS Letter 226J About Affordable Care Act Penalties
Article Name
How to Respond to IRS Letter 226J About Affordable Care Act Penalties
Description
For several months, the IRS had indicated that it would be sending penalty notices to businesses by the end of 2017 if they were out of compliance with the ACA. The process starts with Letter 226J. Here’s what to do if this letter is delivered to your company’s mailbox.
Author
Joanna Kim-Brunetti
Publisher Name
The ACA Times
Publisher Logo
The ACA Times
Short URL of this page: https://acatimes.com/vcx
Joanna Kim-Brunetti

Joanna Kim-Brunetti

Joanna Kim-Brunetti, Esq., is Vice President of Regulatory Affairs for Trusaic.

View more by Joanna Kim-Brunetti

Related tags to article

ACA ComplianceAffordable Care ActApplicable Large EmployersEmployer Shared Responsibility PaymentESRP ResponseForm 1094-CForm 1095-CIRSIRS AuditIRS Form 14764IRS Letter 226JIRS Letter 227IRS Office of AppealsNotice and Demand for Payment (Notice CP 220J)PenaltiesPremium Tax CreditSafe Harbor
Related Articles How to Leverage Your Workforce Data to Meet DEI Goals How to Leverage Your Workforce Data to Meet DEI Goals
Related Articles An Employer’s Guide to Navigating the DEI&A Landscape An Employer’s Guide to Navigating the DEI&A Landscape
Related Articles Governments, Investors, & Litigators Are Focusing More on ESG Governments, Investors, & Litigators Are Focusing More on ESG
Related Articles Administration Predicts Lower ACA Enrollment by Robert Sheen  •  
Related Articles IRS Eases Rules on Hardship Exemptions by Robert Sheen  •  
Related Articles HHS Awards $36 Million To Health Centers by Robert Sheen  •  
How to Respond to IRS Letter 226J
Subscribe

Popular Posts

  • California Individual Mandate Penalties Will be Issued in 2021
  • Biden’s Affordable Care Act Advancements are Underway
  • What Employers Need to Know About the 2020 ACA 1095-C Codes
  • Employers May Face Additional Challenges with 2020 ACA Reporting
  • Five Resources Essential for ACA Compliance in 2021
  • The IRS is Issuing ACA Penalty Letter 226J for 2018
  • Most Frequently Asked ACA Questions for Employers and Individuals
  • Taxpayers (Including Employers) Have the Right to the Challenge IRS

Trending Topics

  • Regulations
    (91)
  • Legislation
    (47)
  • Editorials
    (19)
  • ACA Compliance
    (126)
  • Tax Filings
    (19)
  • Applicable Large Employer (ALE)
    (13)
  • Penalties
    (18)
  • IRS
    (82)
  • Health Insurance Marketplace
    (28)
  • Polls/Surveys
    (18)
  • Health Care Reform
    (22)
  • Reporting
    (22)
  • IRS 226J/226-J
    (28)

Categories


Brought to you by Trusaic

 

 

 

Twitter Facebook

Downloads

The ACA 101 Toolkit

The Essential Guide to the ACA

Letter 226J Infographic

5 Common ACA Compliance Mistakes

Triangle of Trust

Articles

IRS Affordability Safe Harbors Help Avoid ACA Penalties

Calculating FT and FTE Employees

The ACA Monthly Measurement Method: A Few Examples

The IRS’s 1095 Forms for ACA Explained

Incorrect ITINs Will Cause Havoc With ACA Compliance

Knowledge Center

Get to know the ACA

Get to know Letter 226J

Webinar: The Recipe for Successful ACA Compliance

Trusaic News

Our Story

© 2021 Copyright Trusaic - All Rights reserved.

Close Window

Loading, Please Wait!

This may take a second or two. Loading, Please Wait!