IRS Letter 5699, Missing Information Return Form 1094/1095-C

What is IRS Letter 5699?

IRS Letter 5699, Missing Information Return Form 1094/1095-C Letter, is used to make initial contact with the employer.

This letter notifies the employer that it may not have filed for the specified tax year, and/or that the employer may not be in compliance because the IRS has yet to receive their filing.

Why did I receive IRS Letter 5699?

The IRS issues Letter 5699 to employers that may not have complied to ACA reporting requirements for the specified tax year.

The IRS identifies potential noncompliance using employers’ total Form W-2 count for the same tax year.

What do I do after I receive Letter 5699?

In Letter 5699, employers are given the following choices regarding their filing situation:

  • The employer filed the forms under a different EIN.
    • If this is the case, the employer must provide the name, EIN, and date for the filing.
  • The employer should have filed the forms, but did not.
    • If this is the case, the employer must provide the response with the delinquent filing or provide the response and date for when the filing will be electronically submitted.
  • The employer was not an ALE and was not required to file.
  • The employer has an “other” reason for not submitting a filing.

A response must be submitted to the IRS within 30 days from the date of the letter.

What happens if I don’t respond to Letter 5699?

The IRS will send a Letter 5698 if an employer does not respond to Letter 5699. This second letter reminds the employer that they have yet to respond to the previous notification.

If there is still no response after Letter 5698, then the case will be assigned to an IRS examiner who will determine if they will pursue a penalty case for Failure to File and Failure to Furnish Forms 1094-C / 1095-C.

Before a penalty case begins, the examiner will try to contact the employer by phone if the IRS has it in their Integrated Data Retrieval System (IDRS). If the examiner is unable to contact the employer, then they will use the established procedures to begin with the penalty case.

What happens after I respond to Letter 5699?

It depends on the response that was sent to the IRS. We outline the various situations outlined by the IRS below.

Response: Employer filed using a different EIN.

If the employer this way, then the examiner will use the EIN and ensure that the filing was submitted.

It’s important to note that filings must be submitted using the current name and EIN of the employer (at the time of the filing). A filing should never be submitted using the name/EIN of a related company, parent company, or other third-party vendor.

  • If the examiner is able to confirm that the return was filed under the EIN provided, they can close the case and issue the employer with Letter 5840, Information Return Closing Letter.
  • If the examiner is unable to confirm that the return was filed under the EIN provided, then they will contact the employer to determine why it hasn’t been filed and they will request additional information to resolve the case. If the employer is unwilling to comply to resolve the issue, then penalties may be pursued.

Response: Employer should have filed, but didn’t and provides a paper filing.

If the employer responds this way, then the examiner that the filing was submitted under the name/EIN that was contacted. They will also verify that the filing is less than 250 forms. If it is more than 250 forms, then the employer is required to file electronically.

  • If the name/EIN match and the filing has less than 250 forms, then the filing will be forwarded to be processed.
  • If the name/EIN do not match, or the filing has more than 250 forms, then the examiner will make a determination about the filing
    • If the employer is required to file electronically and fails to do so, then they may be subject to penalties.

If the employer does not provide a reason that the filing was late, then they may be subject to penalties.

Response: Employer should have filed, but didn’t and provides proof of electronic filing.

If the employer responds this way, then the examiner will verify that the return has been sent and document the findings.

If the examiner is unable to verify, then they will contact the ALE to resolve the issue.

If the employer does not provide a reason that the filing was late, then they may be subject to penalties.

Response: Employer states that they were not an ALE and not required to file and does not provide documentation.

If the employer responds this way, then the examiner will contact the employer and try to determine why they believe that they are not an ALE.

  • If the information provided supports the employer’s position, then the examiner will document the conclusion, close the case, and issue the employer with Letter 5840, Information Return Closing Letter.
  • If the information provided does not support the employer’s position, then the examiner will discuss next steps with the case manager.

Response: Employer states that they were not an ALE and not required to file and provides documentation.

If the employer responds this way, then the examiner will determine if the response and documentation provided supports the employer’s position.

  • If the information provided supports the employer’s position, then the examiner will document the conclusion, close the case, and issue the employer with Letter 5840, Information Return Closing Letter.
  • If the information provided does not support the response, then the examiner will discuss next steps with the case manager.

Response: Employer checks the ‘other’ box on Letter 5699.

If the employer responds this way, then the examiner will determine if further action is required. They will document the facts and conclusions in the case file and determine if there are any applicable penalties.

Response: Employer states they are no longer in business and provides documentation.

If the employer responds this way, then the examiner will determine if the response and documentation provided supports the employer’s position.

  • If the information provided supports response, then the examiner will get approval to close the case, document the conclusion, close the case, and issue the employer with Letter 5840, Information Return Closing Letter.
  • If the information provided does not support the response, then the examiner will discuss next steps with the case manager.

What are the penalties for not filing or filing late?

If you are required to file these information returns and fail to file or fail to furnish forms by the due date, then you may be subject to the following penalties:

  • Failure to file correct forms – $290 per form, maximum of $3,532,500.
  • Failure to furnish recipient forms – $290 per form, maximum of $3,532,500.
  • Failure to file electronically, when required to do so – $290 per form.

Special rules apply that increase the per-return and per-statement and total penalties if there is intentional disregard of the requirement to file the returns and furnish the required statements.

2022 Instructions for Forms 1094-C and 1095-C

Please note that there are penalties for both failure to file AND failure to furnish forms, so the penalty is doubled if the employer did not file or furnish forms.

Check out the graphic below to see how quickly fines can accumulate based on a sample size of 250 forms the business should have filed.

Failure to file 1095c TY2022
IRS Potential Fine Amounts

Conclusion

IRS Letter 5699 is used to make initial contact and notifies the employer that it may not have filed for the specified tax year, and/or that the employer may not be in compliance because the IRS has yet to receive their filing.

The IRS is going to continue enforcing ACA provisions for timely filing and furnishing forms, so it’s important that employers stay up-to-date on all the latest ACA news.

View our Essential Guide: Mastering Form 1095-C to learn more about Form 1095-C or download our Understanding Form 1095-C guide PDF.

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.

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