IRS Letter 226J: Everything You Need to Know

Are you an Applicable Large Employer (ALE) subject to the Employer Mandate of the Affordable Care Act (ACA)? If so, you're likely aware of the ACA's complex rules and regulations and the importance of accurate reporting. Failing to comply with the Employer Mandate can result in costly penalties from the IRS, leaving many ALEs feeling overwhelmed and unsure of how to avoid these penalties.

As of 2021, the IRS has been sending out Letter 226j penalty notices en masse, indicating that they have found an issue with an ALE's ACA compliance and proposing a penalty payment. ALEs only have 30 days to respond to a 226j notice, adding to the stress and complexity of the already complicated ACA compliance process.

The IRS uses data reported by employers and employees on Forms 1094-C and 1095-C to identify employers who may be subject to the employer shared responsibility provisions of the ACA. These forms are used to report information about the employer's offers of health coverage to their full-time employees.

The IRS may also use information related to the Premium Tax Credit (PTC) to identify employers who may be subject to the employer shared responsibility provisions of the ACA. The PTC is a tax credit available to eligible individuals who purchase health insurance through a Health Insurance Marketplace and meet certain income requirements. Employers who have full-time employees who receive the PTC may be subject to employer shared responsibility payments if they have failed to make affordable offers of coverage that provide minimum value to their full-time employees.

The IRS then conducts a review to determine if the employer is in compliance with the ACA's employer shared responsibility provisions, including whether the employer has made affordable offers of coverage that provide minimum value to full-time employees.

If the IRS determines that an employer is potentially non-compliant with the ACA's employer shared responsibility provisions, the IRS will issue a Letter 226J to the employer. This letter will inform the employer of the potential liability for employer shared responsibility payments and request information to determine the employer's compliance with the ACA.

The employer must respond to the Letter 226J within 30 days of the date of the letter. The employer may contest the assessment of liability by providing additional information or documentation to the IRS. 

After reviewing the employer's response, the IRS will send the employer a Letter 227, which explains the final determination regarding the employer's potential liability for employer shared responsibility payments.

If an employer disagrees with the IRS's determination, they may request a pre-assessment conference with the IRS Office of Appeals. The employer may also file a petition in the U.S. Tax Court if they disagree with the determination made by the IRS. 

It is important for employers to take the necessary steps to ensure compliance with the ACA's employer shared responsibility provisions to avoid receiving a Letter 226J. However, if an employer does receive a 226J letter, it is important to respond in a timely and accurate manner with the assistance of experts like United ACA Solutions.

At United ACA Solutions, we understand the challenges of complying with the Employer Mandate and the importance of accurate reporting. Our proactive approach to ACA compliance ensures that our clients avoid receiving surprise 226j letters from the IRS.

We've had numerous new clients come to us with horror stories of their previous ACA compliance vendors taking no responsibility for mistakes made in ACA reporting. These vendors have blamed their clients for any errors, saying that they only reported what their clients told them to. At United, we take a more hands-on approach, examining our clients' data and determining compliance levels. We then work proactively with our clients to get them in compliance and avoid costly penalties.

It's critical to get expert help immediately when facing a 226j notice. At United, we have a team of ACA experts who can help you navigate the complexities of the Employer Mandate and respond to a 226j notice. We work closely with our clients to ensure that the information provided to the IRS is accurate and that any proposed penalty payments are correct. Our expertise in both data and the ACA's regulations has allowed us to reduce or eliminate significant penalties for our clients.

In addition to providing expert guidance, we will interface directly with the IRS on our clients' behalf. This means that you won't have to worry about communicating with the IRS or responding to any requests for additional information. We'll handle everything for you, giving you peace of mind and allowing you to focus on running your business.

Our team of ACA experts proactively monitors our clients' compliance status throughout the year, ensuring that we identify and correct any failures to offer health coverage to full-time employees before they escalate into costly penalties. We work with our clients to ensure accurate reporting and avoid any unpleasant surprises from the IRS.

If you're an ALE subject to the Employer Mandate, it's critical to ensure that you're complying with the ACA's rules and regulations. If you've received a Letter 226j from the IRS, or you're concerned about your ACA compliance, please reach out to us for a consultation. We can provide an honest assessment based on our knowledge and experience to ensure that you remain compliant with the Employer Mandate and avoid costly penalties. At United ACA Solutions, we're committed to providing proactive ACA compliance services to help our clients avoid any unpleasant surprises from the IRS.