On March 10, the Treasury issued a statement announcing that the IRS will be hiring more than 10,000 positions to assist with its current backlog and the 2021 filing season.
The agency is hiring for a wide range of temporary, term, and permanent positions, including entry-level clerks and tax examiners.
Austin, Texas, Kansas City, Missouri, and Ogden, Utah will see new tax professionals in the coming months. Some of the IRS facilities at these locations, such as Ogden, Utah are primarily used for reviewing and processing ACA information. As such, these IRS examiners will audit annual ACA filing submissions, reconcile Premium Tax Credit (PTC) allocations with 1095-C Forms, and assess penalty letter appeals.
With more staff coming aboard to support these ACA-related initiatives, employers should keep a lookout for increased activity from the agency.
Unprecedented IRS backlog
The IRS is currently in the midst of the greatest tax backlog it has ever experienced. Earlier this year it reassigned over 1,200 employees to assist with the 2021 tax year distribution and additional taxpayer correspondence. In December, the agency had over 5 million letters of unprocessed tax information. Recent figures show that the IRS backlog has grown to over 23.5 million in unprocessed documents.
To further alleviate the situation, the IRS halted the issuance of many automated notices, including CP501, CP503, and CP504, to reduce the burden on staff.
As a reminder, the stop on automated notices means that the agency will not send out automated mail relating to tax-related payments, including ACA penalty assessments.
How to prepare for ongoing IRS changes
We’ve recently heard that some employers are receiving additional penalty notices from the agency, despite having resolved or paid the penalty amount.
If you receive a penalty notice from the IRS, review it carefully for accuracy. Also, be sure to check the date as it’s possible it’s no longer applicable.
Best practices encourage keeping electronic copies of all IRS correspondence and receipts. This will help you prepare for inquiries made by the agency and any outdated or incorrect correspondence.
If you need assistance responding to a penalty notice, contact us to learn about your options for responding and possibly resolving the notice. To date, we’ve helped our clients prevent over $1 billion in ACA penalty assessments.
The IRS issues ACA penalties for a variety of reasons, such as late filings, failure to furnish, and non-compliance with the healthcare law’s Employer Mandate.
Under the ACA’s Employer Mandate, Applicable Large Employers, or employers with 50 or more full-time and full-time equivalent employees must:
- Offer Minimum Essential Coverage, that meets Minimum Value, to at least 95% of their full-time employees and their dependents; and
- Ensure that the coverage is affordable by using one of the IRS-approved safe harbor methods for calculating affordability.
Employers that do not meet the requirements of the ACA’s Employer Mandate could receive penalties from the IRS via Letter 226J. The agency is currently issuing Letter 226J for the 2019 tax year, but previous reporting years are fair game as there is no statute of limitations on ACA penalties.
To learn more about complying with the ACA, download the ACA Essential Guide for Employers below.
For information on ACA penalty amounts, affordability percentages, important filing deadlines, steps for responding to penalty notices, and best practices for minimizing IRS penalty risk, download the ACA 101 Toolkit.