The Internal Revenue Service (IRS) has intensified its enforcement of the Affordable Care Act (ACA) for the 2023 tax year, issuing Letters 5699 and 226-J to employers with potential reporting discrepancies or compliance issues. Understanding these notices, their implications, and the appropriate responses is crucial to minimizing financial and legal risks.​

Key Differences Between IRS Letters 5699 and 226-J

Why Timely Action Matters for 2023 ACA Penalties

The IRS has prioritized ACA compliance under recent legislative changes, leading to stricter audits for 2023 filings. Delaying a response can result in:​

• Increased Penalties: Unpaid fines accrue monthly interest and failure-to-pay fees.​
• Loss of Appeal Rights: Missing the 30-day deadline forfeits opportunities to contest the penalty.​
• Operational Disruptions: Unresolved penalties may trigger additional IRS scrutiny or audits.​

How to Address IRS Letters 5699 and 226-J

For IRS Letter 5699:

1. Review the Notice: Identify discrepancies in employee counts, coverage offers, or affordability calculations.​
2. Gather Documentation: Collect corrected Forms 1095-C/1094-C, proof of coverage, and affordability calculations.​
3. Submit a Response: Provide evidence to refute the IRS claims or correct errors by the deadline.​

For IRS Letter 226-J:

1. Audit the IRS Calculations: Verify the accuracy of employee counts, penalty amounts, and violation periods.​
2. Identify Dispute Grounds: Common defenses include errors in IRS data, eligibility for transition relief, or affordability safe harbors.​
3. Submit an Appeal or Abatement Request: File the appropriate forms with supporting evidence.​

Strategies to Reduce or Eliminate ACA Penalties

Employers can often mitigate penalties by:

• Correcting Reporting Errors: Resubmitting accurate Forms 1095-C/1094-C for Letter 5699 cases.​
• Leveraging Safe Harbors: Using the W-2, Rate-of-Pay, or Federal Poverty Line (FPL) methods to prove affordability.​
• Negotiating Abatements: Demonstrating reasonable cause to reduce fines.​

Professional assistance is recommended for complex cases, such as disputes over full-time employee classifications or multi-year penalties.​

Deadlines and Next Steps

• Letter 5699: Respond within 30 days to avoid escalation.​
• Letter 226-J: Pay, appeal, or request abatement within 30 days to prevent penalties from becoming final.​

How ACA Compliance Solution Services Can Assist

If you've received a penalty notice from the IRS, don't wait! ACA Compliance Solution Services specializes in reducing or even eliminating these costly penalties through our Penalty Reduction Service.​

• Fast & Effective Solutions: Our team works swiftly to address IRS notices, ensuring minimal disruption to your operations.​
• Cost-Effective: We aim to significantly reduce or eliminate penalties, saving your organization substantial amounts.​
• Expert Guidance: With extensive experience in ACA compliance, we provide the expertise necessary to navigate complex IRS communications.​

Time is running out! Contact us now for immediate assistance.