IRS Update on ACA Penalty Notices

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By Brandon Soris, CPA

On November 2, 2017, the Internal Revenue Service (IRS) updated its Questions and Answers page to provide information regarding employer shared responsibility payments related to the Affordable Care Act (ACA). The ACA regulations state that employer shared responsibility payments are assessed to Applicable Large Employers (ALEs) that fail to offer their full-time employees minimum essential health coverage that is both affordable and provides minimum value. Impacted employers can expect to receive Letter 226J from the IRS for tax year 2015 around the end of 2017.

What is Letter 226J?

Letter 226J will contain the following:

  • A brief explanation of IRC section 4980H (ACA regulations)
  • A summary of the proposed employer shared responsibility payment
  • Form 14764 for the employer to respond to the notice
  • Form 14765 showing the ALEs’ assessable full-time employees
  • A description of actions the employer should take
  • A description of the IRS actions if the employer fails to respond
  • The name and contact information of a specific IRS agent to address questions

Responses are due back to the IRS by the “response date” noted on the letter (typically 30 days from the date of the letter itself).

What to Expect

While at this point it is uncertain whether the ACA will face another vote on its repeal, it is unlikely that a policy requiring employers to file employee statement forms would be revoked with it. It is important for ALEs to comply with current reporting regulations for the upcoming 2017 ACA reporting season, for the sake of their employees and the company.

Contact your Sikich representative for help with Letter 226J and Forms 1095-C and 1094-C. Our advisory team is readily available to assist you with any questions regarding addressing responses, requesting extensions, and filing appropriate forms.

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. In addition, this publication may contain certain content generated by an artificial intelligence (AI) language model. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.


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