What Happens After I Receive IRS Letter 226-J?

The Patient Protection and Affordable Care Act (ACA) is complicated. The ACA penalty process being initiated by the IRS is no exception. Employers receiving notifications (IRS letter 226-J) must respond within 30 days to avoid further action by the IRS. This year the IRS will begin collecting penalties from businesses that did not comply with the ACA Employer Mandate in 2015. Here is what happens after you receive IRS letter 226-J.

What Happens After I Receive IRS Letter 226-J?

Like I have already stated you will only have 30 days to respond to the IRS. However, depending on whether you agree with the assessment made the IRS you may need more time to review all of your information. If you request additional time within these 30 days, you may be granted an extension.

Strategizing Your Response

As an HR manager or a member of the benefits department, you should not handle this alone. Contact your CFO, owner, or any other internal experts that should be a part of the conversation. Depending on your organization it might be in your best interest to seek external or internal legal counsel.

Understand Your Liability

While your current 226-J letter is about your compliance in 2015, the penalty process will not only be limited to that year or specific payments. Work with your team to ensure you fully understand the scope of payment and penalties you may owe for any additional years.

Review Forms 1094-C and 1095-C

If you are in disagreement with the IRS, it is essential that you review your Form 1094-C and 1095-C. It could be that the inaccuracy was the cause of the incorrect penalty assessment. 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 in your response to the IRS.

Respond to IRS Letter 226-J

It is critical that you respond to the IRS within 30 days. Responding is especially true if you do not agree with the IRS. You will need to complete Form 14764 to return to the IRS and indicate whether you agree with their assessment. If you agree with the penalties, you will need to include your organization’s payment.

If you disagree with the assessment, you will need to explain your discrepancies. You will need to provide extensive information proving your claim as well as specific corrections that need to be made to your previously filed forms.

Wait For Confirmation by The IRS

Once you have submitted Form 14764, you will receive IRS letter 227. This letter will contain what steps your organization must take next. If you disputed the penalty payment, your letter might request more information or even a new amount. If you disagreed with the penalty, you could then ask for a Pre-Assessment Conference with the IRS Office of Appeals. This, however, must be completed within 30 days of receiving IRS letter 227.

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