ACA-Track™

Employer ACA Compliance & Reporting Solution

  • Contact Us
  • |
  • Request Demo
  • About
    • FAQ
  • Businesses & Organizations
  • School Districts
  • Partners
  • Services
  • Resources
    • Blog
    • Full-time Equivalent (FTE) Employee Calculator
    • Vendor Assessment

July 10, 2019 By ACA-Track™

Responding to IRS Letter 226-J

So, you recently received a Letter 226-J from the IRS regarding your Affordable Care Act. You are not alone!

The IRS began issuing these penalty letters back in 2018, starting with the 2016 ACA reporting year. The IRS continues to issue Letter 226-Js to Applicable Large Employers (ALEs) identified as failing to comply with the ACA’s Employer Mandate for any of the past three IRS reporting years.

Under the ACA’s Employer Mandate, 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). That coverage must meet Minimum Value (MV) and be affordable for the employee or the company is subject to IRS 4980H penalties.

Why did my company receive this letter?
There could be several reasons:

  • Your business filed one or more Form 1095-C – the Employer-Provided Health Insurance Offer and Coverage. The IRS used the information your company provided on Forms 1095-C and 1094-C to determine your company’s potential liability for an Employer Shared Responsibility Provision (ESRP).  It may be your company didn’t provide the minimum coverage for full-time employees.
  • One or more full-time employees listed on the Form 1095-C received a Premium Tax Credit on his or her federal income tax return.
  • Your company is an ALE, but your company did not file Forms 1095-C and/or 1094-C.

Regardless of the reason for receiving the letter, your company must take action.

What does my company do now?
You must address any IRS letter with immediate attention:

  1. Read the letter and its attachments carefully. These documents explain the ESRP process and how the information used by the IRS affects the computation. The letter also fully explains the steps to take if your company agrees or disagrees with the proposed ESRP computation.
  2. Complete the ESRP Response Form 14764 indicating whether your company agrees or disagrees with the letter.
  3. If needed, your company can request more time.  Call the IRS and request an extension for your response. Contact your benefits administrator – gather all the information and documentation you will need to respond.

Your Options
Option 1
– If your company disagrees with the proposed ESRP liability, the next step is to provide a full explanation of the disagreement and/or indicate changes needed on Form 14765 – the Employee Premium Tax Credit Listing.  Return all documents as instructed in the Letter 226-J by the response deadline.  The IRS will acknowledge your company’s response with an IRS Letter 227.  Letter 227 will describe further actions your company may need to take.  If your company wishes, it may request a Pre-Assessment Conference with the IRS Office of Appeals within 30 days of the date of the Letter 227.

Option 2 – If your company agrees with the proposed ESRP liability, follow the instructions to sign the response form (Form 14764) and return with full payment in the envelope provided.

Conclusion
Receiving a Letter 226-J from the IRS isn’t necessarily a catastrophe; however, to protect itself from potential catastrophic penalties, your company must gather documentation and respond to the Letter 226-J by its stated deadline.

 


 

Looking for an ACA solution you can trust for accuracy, ease of use and first-class product support? Contact us: clientsolutions@psst.com or 1.800.488.7395.

Filed Under: ACA Compliance

Contact Us To Become A Partner

1.800.488.7395

 

Latest from the blog

  • Preparing for 2020 ACA Reporting Starts Now!
  • How an Individual Coverage HRA impacts reporting for the Affordable Care Act in 2020
  • Case Study: Fort Worth Independent School District
  • IRS Updates Filing Status for ACA Information Returns
  • IRS Extends Form 1095 Distribution Deadline for 2019 ACA Reporting
  • Request A Demo
  • Support
  • Contact
  • Terms & Conditions

Address

303 N Hurstbourne Pkwy, Ste 110
Louisville KY 40222

Encouraging Words for the Day

A heart at peace gives life to the body, but envy rots the bones.
Proverbs 14:30
A gentle answer turns away wrath, but harsh words stir up anger
Proverbs 15:1
A cheerful heart is good medicine, but a crushed spirit dries up the bones.
Proverbs 17:22
Copyright © 2023 ACA-Track, Inc

Information provided by PSST, LLC concerning the Affordable Care Act is not legal advice and should not be treated as such. If you have questions about how the Affordable Care Act will affect you as an employer, please consult legal counsel.

Privacy Policy | Terms & Conditions

Website Design by The Content Squad