IRS Issues Letter 972CG to Employers for Late ACA Filings
The IRS has started to issue ACA penalties to employers who have filed their annual ACA information past IRS deadlines, another sign that the IRS is further intensifying enforcement efforts.
First, a quick review.
Letter 226J was the first penalty notice to be issued by the IRS. This penalty notice is sent to employers identified as having failed to comply with the ACA Employer Mandate, which requires employers with 50 or more full-time employees and full-time equivalent employees 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.
The IRS is currently issuing Letter 226J for the 2017 tax year. (If your organization has received IRS Letter 226J for failing to comply with the ACA, download this guide to navigate your response to the agency.) IRS staff appears to have completed issuing Letter 226J penalty notices for the 2015 and 2016 tax years and are preparing for future audits.
The second penalty notice issued by the IRS was Letter 5005A. This penalty notice is sent to employers who did not file their ACA forms 1094-C and 1095-C with the federal tax agency under IRC Section 6721 and/or failed to distribute Form 1095-C to employees under IRC Section 6722. As a precursor to issuing these penalty assessments, the IRS sent Letter 5699 to determine if employers had failed to file or distribute their ACA information as required.
Now Letter 972CG is being issued. This penalty notice is being sent to employers who filed their ACA information, but did so after the IRS deadlines established in IRC Section 6721. Some penalties could be in the millions of dollars.
There are three ways the penalty assessments contained in Letter 972CG may be reduced:
1) If the IRS shows an incorrect filing date in the notice, you may be able to correct the filing date to receive a reduced penalty.
2) If the 1095-C form count in the penalty notice reflecting the number of full-time employees was overstated by the employer, you may be able to provide corrected information to receive a reduced penalty.
3) If the IRS information, such as the filing date and 1095-C form count, is correct, the employer can ask the agency to reduce the penalty because of reasonable cause that establishes that the employer acted in a responsible manner and that there were significant mitigating factors with respect to the failure to file on time beyond the filer’s control. Seeking a reduced penalty on the basis of reasonable cause can be the most difficult of these three approaches.
If you haven’t received a penalty notice from the IRS, you may still get one if you haven’t complied with the requirements of the ACA’s Employer Mandate. Undertaking an ACA Penalty Risk Assessment can tell you if your organization is at risk of receiving ACA penalties from the IRS. Some third-party vendors will undertake this assessment at no cost to your organization.
The penalty rates for late filings assessed in Letter 972CG can be found in the table below.
| ACA Returns Filed / Furnished |
Not more than 30 days late | 31 days late until August 1 |
After August 1 |
| Due 01-01-2020 thru 12-31-2020 | $50 per return or statement – $194,500* maximum $556,500^ maximum |
$110 per return or statement – $556,500* maximum $1,669,500^ maximum |
$270 per return or statement – 1,113,000* maximum $3,339,000^ maximum |
| Due 01-01-2019 thru 12-31-2019 | $50 per return or statement – $191,000* maximum $545,500^ maximum |
$100 per return or statement – $545,500* maximum $1,637,500^ maximum |
$270 per return or statement – $1,091,500* maximum $3,275,000^ maximum |
| Due 01-01-2018 thru 12-31-2018 | $50 per return or statement – $187,500* maximum $536,000^ maximum |
$100 per return or statement – $536,000* maximum $1,609,000^ maximum |
$260 per return or statement – $1,072,500* maximum $3,218,500^ maximum |
| Due 01-01-2017 thru 12-31-2017 | $50 per return or statement – $186,000* maximum $532,000^ maximum |
$100 per return or statement – $532,500* maximum $1,596,500^ maximum |
$260 per return or statement – $1,064,000* maximum $3,193,000^ maximum |
| Due 01-01-2016 thru 12-31-2016 | $50 per return or statement – $185,000* maximum $529,500^ maximum |
$100 per return or statement – $529,500* maximum $1,589,000^ maximum |
$260 per return or statement – $1,059,500* maximum $3,178,500^ maximum |
| Due 01-01-2011 thru 12-31-2015 | $30 per return or statement – $75,000* maximum $250,000^ maximum |
$60 per return or statement– $200,000* maximum $500,000^ maximum |
$100 per return or statement – $500,000* maximum $1,500,000^ maximum |
*Average annual gross receipts for the most recent 3 taxable years and Government Entities (Other than Federal entities)
IRC 6721 and IRC 6722 for businesses with gross receipts less than $5,000,000.
^ Average annual gross receipts for the most recent 3 taxable years and Government Entities (Other than Federal entities)
IRC 6721 and IRC 6722 for businesses with gross receipts greater than $5,000,000.
We’re committed to helping companies reduce risk, avoid penalties, and achieve 100% ACA compliance. For questions about the ACA contact us here.
