Affordable Care Act Penalties: Letter 226J

April 10, 2018

The Affordable Care Act (ACA) filings started in tax year 2015 and the reporting has been ongoing. The applicable large employers (ALE’s) that have been required to file the 1095/1094-C haven’t seen any penalties until recently. The penalty assessment notice from IRS is called 226J and it is sent to ALE’s who the IRS believe haven’t fully complied with the ACA insurance requirements. If you receive this notice from the IRS it is important to respond by the date shown on the letter and agree or contest the penalty.  The penalty is reffered to as the “Employer Shared Responsibility Payment” or ESRPs and they are not cheap.

After you submit your response to letter 226J the IRS will submit one of three response letters listed below.

  • Letter 227K: means that the case has been resolved in the employer’s favor. Letter 227K acknowledges that the information in the employer’s response to Letter 226J was accepted, the employer does not owe an ESRP and the IRS has closed its inquiry.
  • Letter 227L: means the IRS agrees with the employer that the amount of the ESRP owed should be reduced. While the employer will still have to make a payment, it won’t be as much as originally requested.
  • Letter 227M: means the IRS disagrees with the employer’s response to Letter 226J and reiterates its demand for the original penalty assessment.

Failure to respond to the notice can result in default judgement on the amounts assessed in the notice.  Make sure you take these notices seriously.  If you have not been filing the 1095-C it is recommended that you transmit for each year to date.  Tab Service Company offers a full service for ACA reporting & compliance so, call today for a quick and easy quote.

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