As of November 22, 2017, the Internal Revenue Service (IRS) has begun notifying employers that they may be liable for an employer shared responsibility penalty under the Affordable Care Act requirements. The initial notification relates to the 2015 tax year and is based on the information that the employer provided to the IRS on the Forms 1094 and 1095. The proposed assessments are being issued to employers on the Form Letter 226J and are the first step in the process toward the assessment of penalties for failing to offer group health plan coverage to full-time employees in compliance with the Affordable Care Act requirements.
Employers receiving a letter will have the opportunity to respond to the proposed assessment and notify the IRS whether it agrees or disagrees with the determinations made by the IRS. Employers are cautioned to take immediate action upon receiving a Letter 226J because all responses must be received by the IRS within 30 days of the notification date listed in the letter. This response will need to conform to the requirements listed in the Letter 226J including the requirement that the employer uses the Form 14764 in submitting its response. Employers who timely respond to the Letter 226J should expect to receive a response from the IRS on a Letter 227 which will acknowledge the receipt of employer’s response and describe additional actions that the employer needs to take. If an employer continues to disagree with a proposed employer shared responsibility payment after the receipt of the Letter 227, it will have the opportunity to request a pre-assessment conference with the IRS Office of Appeals.
Because the proposed assessment is based on information provided on the Forms 1094 and 1095, errors or inaccuracies in preparing these forms could trigger the proposed assessment of potentially significant penalties. In order to correct these errors and limit the potential penalties, employers must provide a detailed and timely response to the IRS. However, if the employer fails to respond within the required timeframe, the proposed assessment will be presumed to be correct and the IRS Will formally assess the penalty and issue a notice of demand for payment.
If you receive a Letter 226J from the IRS, it is recommended that you take immediate action to begin the process of preparing a response to the proposed assessment in order to limit or avoid potentially significant penalties. If you would like Friday, Eldredge & Clark to assist with your response or if you have any questions on this matter, please contact Alexandra Ifrah or Joshua Osborne.
The information provided above is created by the attorney in the Employee Benefits Practice Group at Friday, Eldredge & Clark, LLP. This is not a substitute for legal advice and should be considered for general guidance only. For more information or if you have further questions, please contact one of our Employee Benefits Attorneys.