IRS Using Levy Power to Collect ACA Penalties
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It’s bad enough that employers could face financial penalties for not complying with the Affordable Care Act. Now, the IRS has started using its levy power to take property if employers fail to pay the ACA penalties assessed by the federal agency.
An IRS levy permits the legal seizure of property to satisfy a tax debt. The agency can take money in financial accounts, seize and sell your vehicle(s), real estate and other personal property.
Earlier this year the IRS started issuing Letter 972CG penalty assessments to employers who filed their ACA information, but did so after the IRS deadlines established in IRC Section 6721.
Now the IRS has upped the ante, notifying employers that if they do not pay the amount listed in the 972CG penalty notice, the IRS will levy the employer’s property or rights to property.
We’ve seen the IRS also use the right to levy in respect to Letter 5005A penalty assessments. Letter 5005A 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 sends a Letter 5699 to determine if employers had failed to file or distribute their ACA information as required.
It’s possible that the IRS may start using this same right to collect unpaid ACA penalties issued in Letter226J.
Letter 226J 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 agency is currently issuing penalty assessments for the 2017 tax year.
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.
To learn more about ACA compliance for the 2019 tax year, click here.
For ACA reporting deadlines in 2020 for the 2019 tax year, organizations should review this link for important dates and requirements.
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