We’ve heard from our partners and brokers that the IRS has begun issuing Letter 5699 to employers for the 2019 tax year.
Officially called “Missing Information Return Form 1094/1095-C,” Letter 5699 is the precursor notice that is issued to employers before a penalty assessment. The IRS issues Letter 5699 to Applicable Large Employers (ALEs) identified as having failed to file applicable ACA Forms 1094-C and 1095-C for a specific tax year as required under the ACA’s Employer Mandate.
Under the ACA’s Employer Mandate, Applicable Large Employers (ALEs), or 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 employee or be subject to Internal Revenue Code (IRC) Section 4980H penalties.
Employers that receive Letter 5699 must act quickly. The notice instructs employers to check an applicable response and mail it back to the IRS within 30 days from the date at the top of the letter. The five options employers may select for responding to IRS Letter 5699 for the 2019 tax year are as follows:
- I was an ALE for calendar year 2019 and already filed Form 1094-C and Forms 1095-C with the IRS using the following name ——- and employer identification number (EIN) ——- on date ——.
- I was an ALE for calendar year 2019 and have included my Form 1094-C and Forms 1095-C with this letter. (Do not use this box if you are required to file electronically.) (Explain reasons for late filing below under “Other”)
- I was an ALE for calendar year 2019 and will file my Form 1094-C and Forms 1095-C with the IRS using the following name —– and EIN —– by date —– (If more than 90 days from the date of this letter, explain below under “Other”) (Explain reasons for late filing below under “Other”)
- I was not an ALE for calendar year 2019. Explain reasons below under “Other.”
- Other (Indicate below or attach a statement explaining why you haven’t filed the required returns and any actions you plan to take.)
Responding to the IRS Letter 5669 requires substantial documentation and could prove challenging for some employers. Failing to respond accurately and timely could result in penalty assessments under IRC Section 6721, failure to file, and Section 6722 for failure to furnish required ACA information returns. Employers that intentionally disregard their filing and furnishing requirements could be penalized up to $540 per return for the 2019 tax year.
These penalties are in addition to ACA non-compliance penalties under IRC 4980H(a) and (b), which the IRS will begin issuing for the 2019 tax year very soon. For the 2019 tax year, the employee annualized 4980H(a) penalty is $2,500. The employee annualized 4980H(b) penalty for the 2019 tax year is $3,750. Both the “A” and “B” 4980H penalties are issued via Letter 226J.
If you’ve received Letter 5699 for the 2019 tax year, a Letter 226J penalty could be following closely behind. Trusaic has helped employers abate over $500 million in penalty assessments. Contact us to see how we can help your organization minimize IRS penalty risk.
Recent IRS activity regarding ACA penalty assessments is an ongoing development and employers should anticipate increased scrutiny from the agency. Biden requested an additional $13.2 billion for IRS funding and a recent Treasury Inspector General for Tax Administration (TIGTA) report recommended that the IRS should increase its enforcement efforts to collect ACA non-compliance penalties. The report also recommends that the agency collect penalty assessments from employers who complied but filed incorrectly.
The developments demonstrate that the time for making ACA mistakes has passed and employers must be diligent in their efforts to meet the annual requirements.
For important filing deadlines, steps for responding to penalty notices, affordability thresholds, and compliance traps to avoid, download the 2021 ACA 101 Toolkit.
To understand your organization’s current level of ACA penalty risk, get your ACA Vitals score. The eight-question quiz can you help identify areas within your business that can complicate the ACA compliance process.