The IRS has begun the ACA Penalty Process for Tax Year 2015. If you have received an IRS Letter 226-J, you have 30 days from receipt of the letter to send your response. Reasonable extensions may be requested and it is best to do so as soon as you expect you will need the extra time.
What is IRS Letter 226-J?
IRS Letter 226-J is issued to Applicable Large Employers (ALEs) regarding a potential liability for an Employer Shared Responsibility Payment (ESRP). The proposed ESRP is calculated using the data provided in Forms 1094-C and 1095-C of the employer’s Affordable Care Act (ACA) reporting and the individual income tax returns filed by the employees.
Why did I receive an IRS Letter 226-J?
Based on information provided in your Forms 1094-C and 1095-C, the IRS has determined that you may be liable for an ESRP.
Do I have to pay this right now?
Letter 226-J is not a bill. It is an initial proposal for payment by the IRS. If you suspect the information may be wrong or you disagree with the proposed ESRP, follow the instructions provided in the letter to correct the information with the IRS.
What should I do if I receive an IRS Letter 226-J?
Call the IRS to request a 30-day extension as soon as possible.
If you would like to allow someone to contact the IRS on your behalf, such as your lawyer or accountant, fill out and send Form 2848 to the IRS. Be sure to include the Matter (Employer Shared Responsibility Payment), Tax Form Number (Letter 226-J), and Year or Period in question.
Carefully review the data reported on your Forms 1094-C and 1095-C for accuracy. If you come across any errors, document the changes that need to be made to the data and include this in your response to the IRS Letter 226-J. Do not file corrected Forms 1094-C and/or 1095-C to report any changes to be made for the tax year in question.
If you do agree and plan to pay the ESRP, complete, sign, and date the enclosed Form 14764 and send the Form with payment to the IRS.
We advise that you keep copies of any and all documents sent in response to Letter 226-J.
What happens if I ignore the letter?
If you do not timely respond to Letter 226-J, the IRS will send you a Notice and Demand for the proposed ESRP. The payment will be subject to lien and levy enforcement by the IRS and will accrue interest from the date of the Notice and Demand until the total balance due is paid.
If you submitted objections or corrections in response to Letter 226-J, the IRS will respond with a Letter 227. This letter will describe further action, if any, to be taken.
If the IRS plans to continue pursuing the ESRP, you have the right to appeal their decision with the IRS Office of Appeals.
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If you have any further questions or need more information, we’re always happy to help! Send us an email to [email protected] and we’ll respond in a timely manner to get you the assistance you need.
BoomTax, The Boom Post, and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors prior to engaging in any transaction.