The Internal Revenue Service (IRS) has commenced the distribution of Letter 5699 notices for the 2023 tax year. This swift action underscores the agency’s enhanced efficiency in identifying and addressing non-compliance with the ACA’s Employer Mandate.
Understanding IRS Letter 5699
Letter 5699, officially titled “Missing Information Return Form 1094/1095-C,” serves as a preliminary notice to organizations that the IRS suspects are Applicable Large Employers (ALEs) yet have not fulfilled their ACA reporting obligations. ALEs are defined as entities with 50 or more full-time employees, including full-time equivalents, and are required to:
- Offer at least 95% of their full-time workforce affordable health coverage that provides minimum essential coverage and meets minimum value standards.
- File Forms 1094-C and 1095-C with the IRS annually to report such coverage.
The issuance of Letter 5699 indicates that the IRS has not received the necessary filings from the organization for the specified tax year.
Implications of Receiving Letter 5699
Receiving Letter 5699 is a critical alert that requires immediate attention. While this letter does not impose a penalty, it serves as a precursor to potential financial consequences.
Failure to respond appropriately can lead to substantial fines. For the 2023 tax year, the IRS may assess a penalty of $580 per employee for organizations that fail to file the required information returns. This means that an ALE with 500 full-time employees could face a penalty of $290,000 for non-compliance.
Required Actions Upon Receiving Letter 5699
Organizations that receive Letter 5699 should act promptly. The letter typically provides several response options, including:
- Confirmation of filing: Indicating that the organization has already filed the required forms.
- Intention to file: Stating that the organization has not yet filed but intends to do so promptly.
- Explanation for non-filing: Providing a valid reason for not filing, such as not meeting the ALE threshold for the tax year in question.
It is imperative to respond within the timeframe specified in the letter, usually 30 days from the date of issuance. Failure to do so can result in the escalation of enforcement actions and the imposition of penalties.
Preventative Measures to Ensure Compliance
To avoid the issuance of Letter 5699 and subsequent penalties, organizations should adopt proactive compliance strategies:
- Accurate determination of ALE status: Regularly assess your workforce size to determine ALE status. This includes counting full-time employees and calculating full-time equivalent employees to ensure accurate classification.
- Timely and accurate Filing: Ensure that Forms 1094-C and 1095-C are completed correctly and submitted to the IRS by the designated deadlines. Utilizing electronic filing can provide time-stamped records, which are beneficial in case of disputes.
- Comprehensive record-keeping: Maintain detailed records of all filings, employee classifications, and health coverage offers. The IRS recommends retaining tax-related documents for a minimum of three years, which can serve as evidence of compliance in the event of an audit or inquiry.
- Regular compliance audits: Conduct periodic internal audits to identify and rectify potential compliance issues before they escalate. This proactive approach can help in maintaining adherence to ACA requirements and avoiding penalties.
How Trusaic Can Help
Navigating the complexities of ACA compliance can be challenging. Trusaic’s ACA Complete® delivers everything you need to track, prepare, furnish, and file 1095-C forms and defend your ACA compliance. In addition to ensure your compliance and avoiding Letter 5699 with our ACA 1095-C and 1094-C filing services, you receive:
- Monthly monitoring: Receive alerts for when offers of coverage are required to avoid penalties.
- Designated ACA specialist: Expert support is at your service to answer any compliance-related questions you have or need addressed.
- Penalty risk assessment: Our tool identifies gaps in coverage so you can resolve them before they escalate into penalties.
- Audit defense: Receive comprehensive defense in the event of an IRS or state audit. We’ve never lost an audit.
Want to experience peace of mind with ACA compliance for the 2024 tax year and beyond?
