Receiving a Letter 226J from the IRS typically comes emotions resembling shock or concern. Due to the complexity of the Patient Protection and Affordable Care Act (known by most as just the ACA), employers must handle the ACA penalty process with urgency.
Thousands of employers receive IRS Letter 226J each year for failing to comply with shared responsibility provisions stated in the Patient Protection and Affordable Care Act but are unsure of the next steps to take. We’d like to remedy that. Here is what to do when you receive Letter 226J from the IRS.
What To Do When You Receive Letter 226J From The IRS
Read Letter 226J in DetailIt is important to thoroughly read through Letter 226J to gain a better understanding of the notice. IRS Letter 226-J is issued to Applicable Large Employers (ALEs) responsible for Employer Shared Responsibility that failed to comply in some way. ALEs have 30 days to review and respond prior to the IRS demanding payment and taking further action.
Note: If your organization decided to not offer healthcare coverage, you should anticipate receiving this letter along with IRS penalties. Factor the cost of these penalties into your annual business expenses.
Refer to IRS Forms 1094-C & 1095-CIf you disagree with the notice sent by the IRS, review your Form 1094-C and 1095-C immediately. One of the most common reasons for organizations receiving a Letter 226J is an inaccuracy on completed 1094-C & 1095-C Forms.
If you need to correct any information on these forms, do not resubmit an amended version to the IRS. You will need to make these corrections as part of your response to the IRS.
Respond StrategicallyIf you feel that your company has received Letter 226J in error, you must respond within 30 days. Although the amount of time to respond is limited, it is very important to confer with other executives within the company prior to contacting the IRS about the perceived violation of the Patient Protection and Affordable Care Act.
Contact your CFO, owner, or any other internal experts that should be a part of the conversation. Depending on the structure and type of organization, it might be in your best interest to seek external or internal legal counsel.
Complete & Submit IRS Form 14764Upon receiving your notice in the mail, you must agree or disagree with the included assessment from the IRS. If you agree with the penalties that are listed in the assessment, simply complete IRS Form 14764 and include the payment for your organization.
ALEs that disagree with the assessment provided by the IRS must explain the discrepancies and supply detailed information proving your claim, along with the specific corrections that must be made to previously filed 1094-C or 1095-C Forms.
Note: Do not resubmit IRS Form 1094-C/1095-C instead of completing Form 14764.
Receive Confirmation From the IRSAfter Form 14764 has been submitted the IRS will send you Letter 227. This letter contains the next steps that your organization is required to take. Disputed payments may come with an additional request for further information or a new penalty amount.
Organizations that still disagree with the penalty can also request a Pre-Assessment Conference with the IRS Office of Appeals but must do so within 30 days of receiving IRS Letter 227.