Apr 11, 2018
The IRS is sending penalty Letter 226-J to applicable large employers (ALEs) for not complying with the ACA’s employer mandate requirements for the 2015 tax year. Letter 226-J notifies these employers that they may be liable for an employer shared responsibility payment (ESRP). Some employers simply checked the wrong box or made some other minor error in reporting, which triggered the letter. The IRS is expected to begin focusing on the 2016 tax year before the end of 2018. An ALE is an employer with 50 full-time equivalent employees or more. Under the ACA, these employers must offer affordable health coverage that provides minimum value to full-time employees and their dependents or potentially owe the ESRP to the IRS. Any employer who gets this letter needs to respond by the deadline. Employers generally only have 30 days to respond to Letter 226-J. Here is how the process works:
- When the employer responds to Letter 226-J, the IRS sends them Letter 227. There are several versions of this letter depending on what the IRS says that the employer needs to do next.
- If the employer disagrees with the response to Letter 227, they can ask for a pre-assessment conference with the IRS Office of Appeals. A conference would take place 30 days from the date of Letter 227.
- If the employer does not respond to Letter 226-J or Letter 227, the IRS will assess the amount of the proposed ESRP and issue a notice as well as a demand for payment.
We partner with carriers that can assist with compliance matters, including PrimePay and Sterling as well as other top carriers. Please feel free to contact me for further information.
