IRS Could Bring ACA Penalties to Many Employers

Published on December 22, 2017

The IRS is assessing penalties based on employers’ 2015 Affordable Care Act (ACA) filings on Forms 1094-C and 1095-C.

Penalties are triggered by:

  • Not offering coverage to enough full-time employees, or

  • Not offering affordable coverage to one or more full-time employees 

These penalties could potentially affect any employer required to comply with ACA for the year 2015. 

Understanding your organization’s penalties

In many cases, employees mistakenly took subsidies from ACA, even though they were offered employer coverage. This means that the IRS may issue penalties to the employer even though the employer is not at fault. In addition, mistakes made by employers in the complex coding of Form 1095-C can result in large penalties, costing up to $3,120 per full-time employee. 

ACA-compliant organizations should be prepared to dispute penalties

Impacted employers will soon be receiving an IRS Letter 226J. Upon receiving this letter, your organization will need to decide if it is in agreement with the penalties listed. 

If your organization agrees with what is stated in IRS Letter 226J:

  • Complete the Form 14764 enclosed with your letter and send it to the IRS with your payment.

    If your organization disagrees with what is stated in IRS Letter 226J:

  • Respond in writing to the IRS within 30 days of the 226J date and dispute the penalty

  • The IRS will send your organization Letter 227, confirming dispute of penalty and describing further required actions

  • If your organization disagrees with the revised penalty, you will have 30 days from the date of Letter 227 to request a meeting with the IRS Office of Appeals

  • The IRS will grant an appeal or deny it and issue your organization Notice CP 220J demanding payment for penalties

(Source: CliftonLarsonAllen - Perspectives - November 30, 2017)