Why IRS Enforcement of the ACA Will Become More Severe in 2020
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The beginning of a new decade is not the only thing certain in 2020 – employers can also count on the IRS continuing to step up their enforcement activities for ACA non-compliance.
As a reminder to employers in conjunction with the Employer Shared Responsibility Payment (ESRP), the ACA’s Employer Mandate, Applicable Large Employers (ALEs) (organizations with 50 or more full-time employees and full-time equivalent employees) are required 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 or be subject to Internal Revenue Code (IRC) Section 4980H penalties.
The IRS has stated that they will continue to issue Letter 226J penalty notices to employers identified as having failed to comply with the ACA’s Employer Mandate for the 2017 tax year through mid-May. Following the issuance of said letters, the agency will begin to issue Letter 226J penalty notices for the 2018 tax year.
The agency also stated that there will be an increase in the number of Letter 226J penalty assessments for the 2018 tax year.
This news indicates that the agency has become much more detail oriented in their penalty assessment process, making sure that every employer liable for penalty receives one.
Already, the agency has begun issuing penalties to employers identified as having failed to file their annual ACA information for the 2018 tax year. Non-filing penalties are issued via Letter 5005A. Employers, who have not filed yet for 2018, that haven’t received a non-filing Letter 5005A penalty notice should be on the lookout for Letter 5699, which is usually issued beforehand and basically states that the IRS has identified that the organization in question has not filed their annual ACA reporting information.
These penalty notices are not to be confused with the late filing penalties currently being issued through Letter 972CG.
If the sheer number of varying penalties associated with ACA non-compliance isn’t indicative of the IRS’s focus, employers should also note that the IRS has remained relentlessly consistent in their enforcement of the ACA thus far, too. Two different members of congress sought waiver of ACA penalties from the IRS on behalf of employers within their constituency but the agency stated that the ACA does not provide for a waiver of ACA penalties.
Employers should also understand that the IRS has also 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.
With the likelihood of an ACA repeal and replace shrinking and the Fifth Circuit Court ruling that punts question of the law’s constitutionality to another day, employers need to be sure they are in compliance with the ACA. Enforcement is only going to continue in severity and the stakes are high.
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 in 2021, click here.
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