The IRS began issuing Affordable Care Act (ACA) penalty assessments in its Letter 226J tax notice in November 2017. These notices are being sent to employers who the IRS identified through its recently developed Affordable Care Act Compliance Validation System “ACV” System, as having failed to comply with the ACA’s employer mandate. So far, the IRS has issued more than 30,000 of these notices containing employer shared responsibility payments (ESRPs) assessments of more than $4.4 billion.
Under the ACA, organizations with 50 or more full-time employees and full-time equivalent employees, are required to offer minimum essential coverage to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets minimum value and is affordable for the employee or be subject to IRS 4980H penalties. These organizations are referred to by the IRS as applicable large employers (ALEs).
According to the latest report from the Treasury Inspector General for Tax Administration (TIGTA), the IRS identified 318,296 organizations that qualified as ALEs for 2015. Of that amount, TIGTA reports that 49,259 are at risk for compliance action by the IRS. Employers who have not yet received a Letter 226J penalty notice for 2015 should not breathe a sigh of relief yet. There are still more Letter 226J penalty notices to be issued for 2015.
The TIGTA report also indicated that the IRS now has the data to begin the analysis to calculate the potential ESRPs for tax year 2016 to be issued to those ALEs determined not to be in compliance with the ACA. TIGTA reports that the IRS has spent over $2.8 million to improve the process for identifying, calculating, and processing ALEs who are not in compliance with the ESRP.
As the IRS improves its ACA enforcement process, employers need to assess their potential risk of receiving IRS penalties for not complying with the ACA. We find many vendors are not providing clients with copies of their filed 1094-C, 1095C, and Receipt IDs provided by the IRS for the 2015-2017 tax years. Consider undertaking a spot audit of your IRS information filings for 2015, 2016 and 2017. We are providing this service at no cost to your business by working with First Capitol Consulting.
To see how this program can benefit your company, please contact us at firstname.lastname@example.org or 949-910-2727