226-J Penalty Reduction Service
If your business has received IRS Letter 226-J, it likely means that the IRS believes you have not complied with the Affordable Care Act’s (ACA) Employer Mandate for a previous tax year. This letter typically outlines proposed penalties for failing to meet ACA reporting requirements. It’s essential to take action quickly to avoid significant penalties that can severely impact your business. ACA Compliance Solution Services is here to help you navigate the complexities of responding to Letter 226-J and potentially reduce or eliminate any penalties.
Why You Need Help with IRS Letter 226-J
IRS Letter 226-J is a serious notice indicating that the IRS believes your business did not comply with the ACA Employer Shared Responsibility Payment (ESRP) provisions. It’s important to understand that this is not a bill—it's an inquiry letter requesting clarification or correction of your ACA filings. If you’ve received this letter, you have 30 days to respond and either accept the proposed penalties, correct inaccuracies, or appeal the decision.
Ignoring this letter or failing to respond properly can result in significant financial penalties. ACA Compliance Solution Services can help you reduce or eliminate these penalties by reviewing your ACA filings, identifying data gaps, and providing a comprehensive response to the IRS.
The ACA Compliance Solution Services Advantage
At ACA Compliance Solution Services, we specialize in helping businesses respond to IRS Letter 226-J and reduce their exposure to ACA penalties. With a limited timeframe to act, we offer fast, efficient, and expert support to guide you through the process. Our team of ACA compliance professionals works closely with your business, your insurance brokers, CPAs, or legal advisors to ensure that your response is accurate and effective.
Our service includes not only crafting a strong response to the IRS but also addressing any operational or data gaps that may have led to the penalty notice in the first place. Our team utilizes proven methodologies, diagnostic tools, and ACA compliance best practices to maximize your chances of reducing or eliminating penalties.
Our Service Offerings
ACA Compliance Solution Services provides a comprehensive suite of services to assist your business in addressing IRS Letter 226-J:
1. Diagnosis and Gap Identification
- Review Letter 226-J: We carefully analyze the letter to understand the IRS’s concerns and the specific penalties being proposed.
- Examine ACA Filings:We review your Forms 1094-C and 1095-C to ensure they were filed accurately and on time and identify any discrepancies or errors.
- Assess Benefits Information: We examine your benefits data and workforce information to confirm compliance with ACA requirements.
- Identify Data Gaps: We identify any operational or data gaps that may have contributed to the IRS’s penalty determination.
- Request Extension if Needed: If necessary, we can assist you in requesting an extension to the 30-day response deadline.
2. Strategy Design and Penalty Assessment
- Perform Redetermination: We assess the accuracy of the IRS’s penalty calculations and perform a redetermination based on our findings.
- Apply Safe Harbor Codes: If applicable, we apply safe harbor codes to help reduce or eliminate penalties.
- Update ACA Filings: If errors or omissions are identified, we assist in updating your Forms 1094-C and 1095-C to ensure compliance.
- Create Long-Term Compliance Strategy:We develop a comprehensive plan to address operational gaps and prevent future issues with ACA compliance.
3. Response Preparation and Submission
- Complete IRS Form 14764:We help you prepare the necessary IRS forms, including Form 14764 (ESRP Response), to respond to the penalty notice.
- Compile Supporting Documents:We gather the necessary supporting documentation to clarify any discrepancies and demonstrate your compliance.
- Submit Your Response: We ensure that your response is submitted to the IRS on time and in the correct format, following all required procedures.
ACA Mandate Enforcement: Letter 226-J & 227
What is IRS Letter 226-J?
IRS Letter 226-J is issued to employers when the IRS believes they have failed to comply with the ACA’s employer mandate, resulting in a proposed penalty for the Employer Shared Responsibility Payment (ESRP). The letter includes a detailed explanation of the penalty, including how it was calculated and which employees are affected. Businesses are given a limited time to respond, either by accepting the penalty, correcting any inaccuracies, or appealing the decision.
Types of Penalties Under the ACA
Under the ACA, there are two primary types of penalties:
- Penalty A: This penalty is imposed on employers who fail to offer health insurance coverage to at least 95% of their full-time employees (70% in 2015).
- Penalty B: This penalty applies if an employer offers health coverage that does not meet the ACA’s minimum value or affordability standards.
What Happens After You Respond to IRS Letter 226-J?
Once you respond to IRS Letter 226-J, the IRS will issue a follow-up letter, referred to as Letter 227, to acknowledge receipt of your response and provide further details. There are different versions of Letter 227, depending on the outcome of your case:
- Letter 227-J: Acknowledges receipt of your response and confirms that the ESRP will be assessed.
- Letter 227-K: Acknowledges that your response has been accepted, and the case is resolved to your satisfaction.
- Letter 227-L: Indicates that the ESRP has been reduced based on your response.
- Letter 227-M: States that the IRS disagrees with your response and reiterates the original proposed penalty.
- Letter 227-N: Acknowledges that the issue has been resolved through the appeals process, and shows any adjustments to the penalty.
What Should You Do If You Receive IRS Letter 226-J?
Receiving IRS Letter 226-J is a critical situation that requires timely action. First, carefully read the letter and note the response deadline, which is typically within 30 days. It’s essential to work with an ACA compliance advisor who can help you prepare a proper response.
The letter will likely include Form 14765, which summarizes the IRS’s calculations. You can either accept the calculations, correct any inaccuracies, or challenge the penalty altogether and proceed with the appeals process. With professional assistance, you can effectively address the IRS’s concerns and reduce your exposure to penalties.
Conclusion
If you’ve received IRS Letter 226-J, it’s crucial to respond quickly and correctly. ACA Compliance Solution Services specializes in assisting businesses with the ACA’s employer mandate penalties. We offer expert support to ensure your ACA filings are accurate, penalties are minimized, and your business remains compliant with IRS regulations. Contact us today to learn how we can help you resolve the issue and protect your business from unnecessary fines.
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