Employers who fail to comply with the Affordable Care Act (ACA) reporting requirements may receive IRS Letter 226-J, imposing a penalty of $2,700 per employee. This letter serves as the initial notification informing employers that they may be liable for an Employer Shared Responsibility Payment (ESRP) under Section 4980H.
What is IRS Letter 226-J?
IRS Letter 226-J is a notification sent to employers indicating that the IRS has reviewed their submitted Forms 1094-C and 1095-C and believes the employer may owe a penalty for not offering adequate health coverage as mandated by the ACA. This letter includes a summary of the proposed ESRP, the steps to respond to the letter, and a list of employees who were offered no coverage or inadequate coverage and who received a premium tax credit.
How to Respond to Letter 226-J
Employers must respond typically within 30 days from the date of the letter. The response should either agree with the proposed penalty or contest it with supporting documentation. Employers can use Form 14764 to indicate their agreement or disagreement with the notice.
- Review the calculations of the proposed penalty.
- Check the information against your own records.
- Provide corrections to information such as the offer of coverage, employee status, and safe harbor codes, if applicable.
- Submit any supporting documents to substantiate your response.
ACA Compliance and Avoiding Penalties
Staying compliant with ACA reporting requirements is essential for avoiding penalties. ACA-Track’s services for large enterprise businesses help monitor, track, and report healthcare coverage offered to employees. With features like automated 1094-C and 1095-C form generation and IRS e-filing, ACA-Track ensures accuracy and timeliness in reporting.
Key Features of ACA-Track for ACA Compliance
ACA-Track provides comprehensive tools to manage ACA compliance effectively:
- Electronic creation and maintenance of IRS reports.
- Integration with any payroll system or HRIS.
- Real-time monitoring of employee eligibility and compliance status.
- Advance alerts for potential compliance issues.
- Dedicated support for handling IRS inquiries and audits.
For more information on managing ACA compliance and avoiding IRS penalties, visit ACA-Track’s About page.