The IRS will use Letter 226J to describe the general procedures it will use to propose and assess an employer penalty. Letter 226J will be issued to an ALE if the IRS determines that, for at least one month in the year, one or more of the ALE’s FTEs was enrolled in a qualified health plan (i.e. individual Marketplace plan) for which a premium tax credit was allowed (and the ALE did not qualify for an affordability safe harbor or other relief for the employee).
Letter 226J will include:
- a brief explanation of the employer mandate (Code Section 4980(H));
- an employer shared responsibility payment summary table itemizing the proposed payment by month and indicating for each month if the liability is an "A" penalty or a "B" penalty, or neither;
- an explanation of the employer shared responsibility payment summary table;
- an employer shared responsibility response form, Form 14764, "ESRP Response";
- an employee PTC list, Form 14765, "Employee Premium Tax Credit (PTC) List" which lists, by month, the ALE’s assessable FTEs, and the indicator codes, if any, the ALE reported on lines 14 and 16 of each assessable FTE’s Form 1095-C;
- a description of the actions the ALE should take if it agrees or disagrees with the proposed employer shared responsibility payment in Letter 226J; and
- a description of the actions the IRS will take if the ALE does not respond timely to Letter 226J.
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There is no guarantee that an employer will receive the letter, however if they do, they must respond by the date shown on the letter (usually within 30 days from the date of the letter). The IRS would use the mailing address and exact employer naming provided on the groups 2015 electronic form (1094-C) filing.
Due to the time sensitivity for responding, we recommend employers alert their mail room or personnel responsible for distributing the mail to be on the lookout for anything coming from the Department of the Treasury, Internal Revenue Service. With only 30-days to respond or request an extension, you will want the letter forwarded to you immediately.
This information is provided as a courtesy to assist in your understanding of the impact of certain regulatory requirements and should not be construed as tax or legal advice. Selerix encourages readers to consult with appropriate legal and/or tax advisers.