Perhaps you are an employer who has received a 226-J letter from the IRS. For those who are unaware, the 226-J letter is a notification of a potential ESRP assessment from the IRS due to possible non-compliance. If you have in fact received this letter; hopefully you have taken the proper steps to timely respond within the recommended 30-day window.
Once you have sent your thoughtful 226-J response to the IRS; it will be reviewed and they will respond with their final determination in the form of Letter 227. Letter 227 is a series of various acknowledgement letters sent by the IRS to close an Employer Shared Responsibility Payment (ESRP) inquiry. This letter may also include “next steps” for the employer regarding the proposed ESRP.
There are five different 227 letters within the series:
Letter 227-J: This letter acknowledges receipt of the signed agreement Form 14764, ESRP Response, and that the ESRP will be assessed. Form 14764 would have been signed and sent by the employer in response to letter 226-J to accept the ESRP assessment. After issuance of 227-J letter, the case will be closed. No response is required.
Letter 227-K: This letter acknowledges receipt of the information provided and shows the ESRP has been reduced to zero. After issuance of this letter, the case will be closed. No response is required.
Letter 227-L: This letter acknowledges receipt of the information provided and shows that ESRP has been revised. This letter will include an updated Form 14765 and revised calculation table. You can agree or request a meeting with the manager and/or appeals.
Letter 227-M: This letter acknowledges receipt of information provided and shows that the ESRP did not change. This letter provides an updated Form 14765 and revised calculation table. You can agree or request a meeting with the manager and/or appeals.
Letter 227-N: This letter acknowledges the decision reached in Appeals and shows the ESRP based on the Appeals review. After issuance of this letter, the case will be closed. No response is required.
As you can see, Letters 227-L and 227-M are the only two letters that REQUIRE a response. It is important to respond by the due date notated within the letter.
What You Should Do Upon Receipt of Letter 227
Be sure to read your 227 letter and attachments thoroughly, because the letter will explain the next steps available and provide information on final resolution. If applicable, complete the response Form 14764 indicating your agreement or disagreement. If you do not agree with the proposed ESRP, you must furnish an explanation of why you disagree on Form 14765. You should return all documents as instructed in the 227 letter by the deadline. On the other hand, if you agree with the proposed ESRP, be sure to sign the response form and return it with full payment.
Additional Precautionary Steps
Before drafting your response to letter 227, you may want to do the following:
- Review the information reported on Forms 1094-C and 1095-C for the appropriate year. You will want to ensure that information provided on these forms was accurate; as this is what was used by the IRS to compute the ESRP.
- Review the information that you provided in response to the Letter 226-J.
- Keep copies of all letters and any documents that you submit.
- Contact the IRS using the contact information in the letter if you have questions or if you need additional time to respond.
Employers should keep in mind that the Letter 227 is not a final bill. Once the ESRP has been assessed, a bill (CP220J) will be sent.
As always, Integrity Data is here to assist you. The Integrity Data ACA Compliance Solution can provide you with some information to assist you with your response to Letter 227. We also encourage you to Connect with Integrity Data at any time to ensure you’re in full ACA compliance.