The IRS is just now reviewing Affordable Care Act reporting submissions for the 2015 tax year. Some employers have been receiving Letter 226J from the IRS. This letter informs the employer that the IRS determined the employer is subject to an Employer Shared Responsibility Penalty (ESRP). The letter explains the proposed penalty and gives the employer an opportunity to contest the assessment.
If the employer disagrees with the ESRP penalty, the employer responds to the IRS using Form 14764. As part of the response, the employer should document why it believes the proposed ESRP penalty is incorrect and should identify any changes to the initially submitted 1095-C forms.
The IRS has released a copy of the form letter it will use in response to an employer’s responding to the ESRP assessment. This letter (226J) indicates that the IRS will review the information submitted by the employer. If the employer did not contest the ESRP, the letter is used to inform the employer that the IRS will be sending a notice and demand for the ESRP amount.
Employers receiving letters from the IRS should review the letters and respond quickly. Remembering the ESRP letters relate to the first filing year, employers should review their initial filings to determine if the IRS should be notified of corrections to avoid ESRP assessments.
