As part of the recently passed Inflation Reduction Act, the IRS will be increasing its tax enforcement efforts, including ACA non-compliance.
With more than 87,000 tax examiners coming aboard and over $80 billion in additional funding, the stakes for ACA non-compliance are high. To add to the severity of the situation, organizations should note that the IRS may use its levy power to satisfy outstanding ACA penalties.
It’s bad enough that employers could face financial penalties for not complying with the ACA, but the risks are far greater than just monetary penalties – the agency could also seize your property.
How does the IRS levy power work?
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.
The agency is currently using its levy power to collect outstanding Letter 972CG penalty assessments. The IRS issues Letter 972CG penalties to employers that filed their ACA information but did so after the IRS deadlines established in IRC Section 6721.
We’ve seen the IRS also use its right to levy with respect to Letter 5005-A and Letter 226J penalties.
Letter 5005-A is sent to employers that 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 the warning notice, Letter 5699 to determine if employers failed to file or distribute their ACA information as required.
Letter 226J is sent to employers identified as having failed to comply with the ACA Employer Mandate, which requires Applicable Large Employers, or employers with 50 or more full-time employees and full-time equivalent employees to:
- Offer Minimum Essential Coverage to at least 95% of their full-time employees (and their dependents) whereby such coverage meets the Minimum Value
- Ensure that the coverage for the full-time employee is affordable based on one of the IRS-approved methods for calculating affordability
The agency is currently issuing Letter 226J penalty assessments for the 2019 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.
Look outward for ACA compliance
The fact is, ACA compliance is growing more challenging with each passing year. With changing affordability thresholds, new 1095-C codes, changes in ACA healthcare, an influx of Premium Tax Credits, and additional state ACA reporting requirements, complying with the ACA on your own is difficult.
Even with stand-alone ACA software, organizations are left to their own devices for proving, substantiating, and demonstrating sound ACA compliance processes to the IRS in the event of an inquiry or audit.
As we head into the eighth ACA reporting season, organizations should acknowledge the weight ACA compliance carries. Failing to get it right could legitimately cost you your business.
Best practices for achieving 100% compliance encourage outsourcing it to an ACA vendor with a proven track record of success. Trusaic’s full-service solution, ACA Complete has saved clients over $1 billion in ACA penalty assessments.
Allocate your staff’s valuable time and resources on priorities that will generate growth for your business and leave ACA compliance to Trusaic. To learn how ACA Complete can help you achieve compliance, meet IRS deadlines, minimize penalty risk, and ultimately save you time and money, visit our ACA Complete product page.
If you’re approaching ACA on your own this year, it’s important to stay informed on upcoming deadlines, penalty amounts, affordability calculations, and tips for combatting ACA penalties. Download the 2022 ACA 101 Toolkit below to get all of that and more.
Undertaking an ACA Penalty Risk Assessment can tell you if your organization is at risk of receiving ACA penalties from the IRS.