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The IRS has started issuing Letter 226J penalty notices for the 2016 tax year to employers identified as having failed to comply with the ACA’s Employer Mandate. Thanks to those readers who have shared with us that they have received Letter 226J or have had clients receive it.
Employers concerned with their potential penalty exposure may want to review their 2016 and 2017 filings to determine if they are at risk of being assessed ACA penalties by the IRS. Consider seeking the assistance of an outside expert to help in this evaluation, preferably one that will provide this type of ACA penalty risk assessment at no cost. If it is determined that there are errors in your IRS filings, you have the opportunity to correct those filings with the IRS before receiving a Letter 226J penalty notice and having to go through the process of responding to it.
As a reminder, under 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 IRS 4980H penalties.
Organizations should ensure they are engaging in good ACA compliance practices to prevent the receipt of future IRS Letters 226J. If your organization is considered to be an ALE, you are required to submit annual information filings with the IRS to prove how well your organization complied with the ACA’s monthly requirements. You should review the final forms issued by the IRS and the IRS filing schedule.
And if you are an ALE that has not filed ACA information with the IRS, and so far have avoided receiving a Letter 226J, submit this information to the IRS as soon as possible to minimize potential penalties, which could be in the millions of dollars. You will want to engage an outside consultant with expertise in the ACA to assist you. Identify one that has a track record of helping companies successfully file their ACA returns without resulting penalty assessments.
If your organization does receive a Letter 226J, this infographic can help you navigate your response to the IRS. With only 30 days to respond, timing is critical.
