Insights: Article

IRS ACA Pay or Play Penalty Letters: Did you receive one?

By Tonya Rule

September 17, 2018

We have had a busy summer helping businesses respond to the IRS “Pay or Play” Letter 226J ACA Penalty notices. If you receive an IRS Letter 226J, it is important to respond timely and with accurate information in order to eliminate, abate or reduce IRS calculated penalties. The following outlines eight things to consider if you receive an IRS Letter 226J:

  1. Respond to the IRS within 30 days of the date on the IRS Letter 226J. If the IRS doesn’t receive a response from the employer within 30 days, a second, final letter will be issued which provides the employer 15 days to respond. However, it is advised to respond to the first IRS letter within 30 days.
  2. For a Letter 226J issued for the 2015-2016 period, there may be transition relief; review the final regulations to determine if said relief is applicable.
  3. Document and respond to the IRS, and detail which transition relief is applicable if it was omitted on the original filings.
  4. Explain and document your position to the IRS regarding whether or not employees were full-time or part-time.
  5. Explain and document to the IRS which employees received an affordable offer of coverage that met minimum value and minimum essential coverage.
  6. Penalty letters are often received because the transmittal form, Form 1094-C, was completed incorrectly. Review this form for accuracy and explain any necessary changes to the IRS.
  7. Provide the IRS enough information to support your opinion that penalties should not be assessed.

Reminder: Forms for 2018 are due to employees on January 31, 2019, and to the IRS on February 28, 2019 if paper filed and April 2, 2019 if e-filed. A holistic approach to ACA compliance is important, and working with your advisor to ensure you are following the rules can save time and money.

It is not uncommon for businesses to receive an IRS Letter 226J as the rules, coding and deadlines continue to change. However, employers who stay on top of the ever-changing ACA rules and utilize knowledgeable professionals tend to come out ahead. Contact your Eide Bailly professional or a member of our ACA team to request assistance in completing the ACA compliance forms or responding to Letter 226J.

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