As 2018 drew to a close, the IRS began sending enforcement letters related to employer compliance with shared responsibility rules under the Affordable Care Act (ACA) for calendar year 2016. Let’s take a look at what this means.
The document in question is known as Letter 226-J and informs employers of their potential liability for an employer-shared responsibility penalty for the year 2016.
Who will receive a letter?
Letter 226-J is issued only to employers that are subject to the shared responsibility rules, known as applicable large employers (ALEs). These typically are companies with 50 or more full-time employees or full-time equivalents (FTEs).
What determines whether a penalty applies?
The determination of liability for an ALE, and the amount of the proposed penalty in Letter 226-J, are based on information from Forms 1094-C and 1095-C filed by the ALE as well as the individual income tax returns filed by the ALE’s employees.
What should you do if you receive a letter?
Whether in agreement or disagreement with the proposed penalty, ALEs must respond to the enforcement letter promptly. Each letter contains a deadline for the response, usually 30 days from the date of the letter itself.
In the response, affected ALEs may either agree to the proposed penalty or dispute the amount in full or in part. No penalty will be assessed, or demand for payment made, until the ALE’s response is received by the IRS.
Each Letter 226-J contains detailed instructions for the required written response from the ALE, as well as the name and contact information of a specific IRS employee to be contacted in the event of any questions regarding the penalty.
Questions about compliance with the ACA or other employee benefits issues? Contact Consolidated Insurance.