Most Applicable Large Employers (ALEs) are aware by now that the IRS is actively issuing penalty assessment letters, letter 226-J, to employers for non-compliance with the Affordable Care Act in previous filing years. The 226-J letter is an initial notification to an ALE explaining that they may be liable for an Employer Shared Responsibility Payment (ESRP).
In addition to sending these dreaded 226-J letters; they have transitioned into sending Notice CP 220J; which is an official notice for payment. The IRS is sending this final notice for payment if they determine that an employer is liable for the penalty amount listed in the initial 226-J letter. The difference between Notice CP 220J and any other IRS letters is that it is a final determination. Therefore, if an employer continues to disagree with the assessed penalty amount; they will have to go through the request for abatement process or file a law suit in federal court.
As a reminder, the IRS penalty notification process goes as follows:
- Employer receives IRS Letter 226-J.
- Employers has 30 days to respond from the date on the 226-J letter.
- IRS responds to employer with Letter 227.
- Pre-assessment conference call with IRS (Optional).
- Notice CP 220J is issued to employer, IF the IRS determines that the assessment is valid.
- Employer can submit questions, request abatement, or challenge the determination in federal court.
The IRS has made this page available to help employers understand this letter: www.irs.gov/individuals/understanding-your-cp220j-notice.
Keep in mind that it is extremely important for ALEs to remain in compliance and to have a solution in place to do so. Please contact us if you have any questions about staying compliant or if you need guidance on becoming compliant with the ACA.