IRS Surprises Businesses with ACA Penalties
Many employers thought their troubles with the Affordable Care Act were over. However, as of early November, the IRS quietly announced their intentions to begin enforcing penalties on businesses with 50 or more employees (known as Applicable Large Employers, or ALE’s). The IRS will be targeting Employer Shared Responsibility Payments for these ALE’s and their failure to comply with the 2015 tax year mandate.
The announcement was made, with no public notice, on their website as an update to the IRS’s Questions and Answers page referring specifically to the Employer Shared Responsibility Provisions under the Affordable Care Act. Details are listed by items 55-58 here.
The IRS stated,
“For the 2015 calendar year, the IRS plans to issue Letter 226J informing ALEs of their potential liability for an employer shared responsibility payment, if any, in late 2017”
Employers who are not compliant with the ever-changing regulations of the Affordable Care Act can expect to receive a Letter 226J.
Some of the things your Letter 226J will include:
- A brief explanation of section 4980H
- An employer shared responsibility payment summary table itemizing the proposed payment by month and indicating for each month if the liability is under section 4980H(a) or section 4980H(b) or neither
- An explanation of the employer shared responsibility payment summary table
- An employer shared responsibility response form, Form 14764, “ESRP Response”
- An employee PTC list, Form 14765, “Employee Premium Tax Credit (PTC) List” which lists, by month, the ALE’s assessable full-time employees (individuals who for at least one month in the year were full-time employees allowed a premium tax credit and for whom the ALE did not qualify for an affordability safe harbor or other relief (see instructions for Forms 1094-C and 1095-C, Line 16), and the indicator codes, if any, the ALE reported on lines 14 and 16 of each assessable full-time employee’s Form 1095-C
- A description of the actions the ALE should take if it agrees or disagrees with the proposed employer shared responsibility payment in Letter 226J
- A description of the actions the IRS will take if the ALE does not respond timely to Letter 226J
A preview of the Letter 226J can be found here.
Generally, the IRS will give you 30 days until payment is due. Should you fail to respond, the IRS will issue a second notice in the form of a demand of payment, Notice CP 220J.
If you receive a Letter 226J, or believe you may, now is the time to act:
- First, reach out to Equify Insurance Services at (817) 490-6800
- Second, let Equify help you prepare a response
- Third, work with Equify on taking immediate action toward becoming compliant
Equify has identified the five principles of a healthy business, and insurance is only one of the conditions contributing to the health of your business. We have developed a tool to help diagnose the areas of your business that may be struggling, we call this our Healthy Business Checklist. Just one check could get you on your way to a better business.
Click here to fill out your checklist today.