If your organization received IRS Letter 226J, it likely means the IRS has determined that your organization did not comply with the Affordable Care Act’s (ACA) employer mandate for the 2015 tax year. Given the complexity of the law coupled with the finite amount of time for employers to respond, managing a response to IRS Letter 226J can be quite challenging.
Here are a few areas where organizations may be exposing themselves to risk when responding to IRS Letter 226J:
- Ignoring the letter
You only have 30 days to respond to IRS Letter 226J, and it may take some time to research and respond to the inquiry by the response date. You will need to act quickly. If your organization doesn’t meet the 30-day timeframe, the IRS will assess the proposed amount and issue a notice and demand for payment.
- Overlooking small mistakes
Carefully review the accuracy of the information found in the letter. This letter helps explain the Employer Shared Responsibility Payment (ESRP) process and how the IRS calculates the assessment. What may have been mistakes on the IRS part could end up costing your organization a significant amount of money.
- Minimizing the effort behind a thorough and effective response
Many employers have a difficult time crafting a well-written appeal to any or all of the proposed ESRP. Remember, the ACA Employer Mandate required organizations to collect and track information from multiple sources including payroll, HR, benefits administration, time and attendance, and more. You’ll need access to all of the necessary data from your 2015 ACA reporting, including 1095-C and 1094-C data, to craft your response carefully and provide the necessary documentation.
- Being reactive instead of proactive
Some organizations may not have a response plan for IRS Letter 226J until they receive the IRS proposed penalty, but this could be putting your organization at risk of lost time and money while you’re scrambling to respond. While the current letter refers to the ESRP for the 2015 tax year, more notices are expected to come for the 2016 tax year filing and future tax years. Maximize your ACA compliance strategy by proactively working with your internal and external resources to help mitigate IRS penalty risk for other tax years.
With such high stakes, now is not the time for ALEs to risk non-compliance. If your organization needs support in managing ACA reporting for prior, current, or future years, contact the specialized ACA team at Equifax today.
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