Whether you are a business owner providing your employees with affordable health insurance coverage or an insurance provider, the idea of ACA penalties is an unsettling one.
As you probably know, IRS penalties for ACA reporting can be hefty and they can really add up quickly.
If you’ve received a Letter 5699 from the IRS, your initial response may be panic. That is understandable, but not helpful. Here is a guide to Letter 5699, what the letter means, why you may receive one, and most importantly, how you should respond to it.
What is IRS Letter 5699?
The IRS sends a Letter 5699 to Applicable Large Employers (ALE) regarding their ACA reporting. The letter will include the following information:
The date that the letter was sent.
The business’ Taxpayer Identification Number (TIN).
The Tax Year(s) that the letter is in regards to.
The IRS Contact that the business can reach out to with questions.
A telephone number for this contact.
An e-fax number for this contact.
Why does the IRS send Letter 5699?
The IRS sends the Letter to ALEs to inquire about their ACA reporting if it is either missing or incomplete. The letter is designed to notify the business that they were not compliant and to require the business to provide a reason for the non-compliance.
The IRS is aware that the business failed to comply with their ACA reporting requirements because they compared it to the W-2 Forms that the business completed and filed for the same tax year.
What are the Consequences of Not Filing ACA Forms?
If you fail to follow the instructions and respond to the letter in a timely manner, and fail to provide the required documentation, there may be cause to panic. Here are the IRS penalty rates that can be levied for missing and incomplete ACA reporting.
If you file accurate forms 30 days after the deadline, you could be fined $50 for each applicable return.
If you fail to file accurate forms after 30 days have passed, but before August, you could be fined $100 for each applicable return.
If you file accurate forms after August, you could be fined up to $270 for each applicable return.
How should you respond to IRS Letter 5699?
When you initially receive the letter, read it carefully to fully understand your options for responding. Once you understand what information the IRS is missing from your ACA reporting, you should gather your ACA reporting documentation and compare the two.
Based on the information you have documented and what the IRS is requesting, you can choose your response accordingly. Letter 5699 gives you the following 5 responses to choose from.
Option #1 – You were an ALE for the calendar year and already filed ACA Forms 1094/1095 with the IRS
Option #2 – You were an ALE for the calendar year, and you haven’t filed but you will be including paper copies of the forms when responding to the letter.
Option #3 – If you haven’t filed ACA Forms 1094/1095, but will be able to file them within the next 90 days, choose this option. If there is a reason that you need more than 90 days, you will need to provide a reason under the “other” option.
Option #4 – If you were not an ALE for the calendar year, select this option and explain why not below the “other” option on the letter.
Option #5 – This is the “other” option. If you need to explain your reasoning for not filing the correct forms and how you plan to meet these reporting requirements.
Deadline to Respond to Letter 5699
The IRS requires that you respond to the letter within 30 days of receiving it. Keep in mind that the sooner you respond, the better.
ACAwise is Here to Assist You!
The team at ACAwise has been helping ALEs meet their IRS compliance since the Affordable Care Act was created. We have a wide range of experience helping with the intricacies of the ACA reporting process. One of these intricacies includes responding to Letter 5699.
You are required to respond to this letter with a timeline or action plan for meeting your requirements and the ACAwise team is here to help make this plan. We offer flexible features to meet all of your IRS and state filing and recipient copy distribution needs. Reach out to our team today for more information and a free quote.