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Coming Soon: 2015 Employer Shared Responsibility Penalty Notices


  04:48:00 pm, by MedBen5   , 513 words,  
Categories: News, Health Care Reform, IRS

Coming Soon: 2015 Employer Shared Responsibility Penalty Notices

IRS building

What does the IRS do while it awaits the outcome of tax reform? It works on identifying employers that are not complying with the Affordable Care Act’s (ACA’s) employer shared responsibility mandate.

In April, a Treasury Inspector General for Tax Administration (TIGTA) audit revealed that the IRS’ processes to ensure that applicable employers are compliant with the information reporting requirements mandated by the ACA were falling short. Well. that’s all changed.

The IRS has announced that they have begun issuing letters to inform applicable large employers (ALEs) of their potential liability for an Employer Shared Responsibility Payment (ESRP) in late 2017. The IRS determination of whether an employee may be liable for an ESR Payment is based on 2015 calendar year data reported to the IRS on Forms 1094-C and 1095-C during the first quarter of 2016.

IRS “Letter 226J” will notify employers that the IRS believes the employer owes money under the ACA’s Employer Mandate provisions for calendar year 2015. Two forms are included with the letter.

The first form, Form 14764 (Employer Shared Responsibility Payment Response), must be used to respond to the IRS’ inquiries. The other, Form 14765 (Employee Premium Tax Credit (PTC) Listing), lists each full-time employee that was allowed a PTC on his or her tax return for one or more months in 2015 and did not have an affordability safe harbor or other relief reported on such employee’s Form 1095-C. If an employer disagrees with all or a portion of the proposed ESRP, Form 14765 must be returned with the response marked to show corrections to Line 14 and/or 16 codes, as necessary.

Letter 226J also directs ALEs to include a signed statement explaining why the employer disagrees with all or a portion of the proposed ESRP and any supporting documentation. For reference, Letter 226J looks like this sample released by the IRS earlier this month. The actual letter is eight pages long and includes the two forms described above, along with instructions on how to respond.

ESRP letter sample

If you receive a Letter 226J, the response Form 14764 must be signed and received back by the IRS no later than the response date shown on the first page of Letter 226J – usually 30 days from the letter date. Form 14764 provides a telephone number for the employer to call to request more time to respond.

Not sure what to expect? Right now, the best preparation is documentation. Make sure you have copies of your 2015 IRS Form 1094-C and all of the IRS Forms 1095-C you filed on your employees, along with documentation proving offers of employer-sponsored plan coverage if you made such an offer, as well as calculations of affordability on that coverage.

Please know that while MedBen is here to help, these are plan-related tax issues which must not be taken lightly. It is possible that if you disagree with the IRS’ findings, you may need legal assistance to help make your case. In the meantime, Clients who have questions are welcome to contact Caroline Fraker at 800-851-0907 or

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