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226-J Penalty Reduction Service

The IRS has been sending Letter 226J notices to employers that it believes have failed to comply with the requirements of the Employer Mandate Provisions under the Affordable Care Act (ACA) for the 2015 & 2016 tax year. If you have received one of these dreaded letters, you need urgent help! ACA Compliance Solution Services can help you to reduce or eliminate your ACA penalty and get your business back in good standing with the IRS. 

The ACA Compliance Solution Services Advantage

With only 30 days to respond, ACA Compliance can quickly mobilize resources to guide you through the process. Our approach is to not only help you prepare a highly effective response to Letter 226J in quick time, but also address the operational or data gaps that led to the penalty notice. Our team comprises of highly qualified and experienced ACA compliance experts, who work closely with employers or their insurance brokers, CPAs or law firms through the response process. Our Letter 226-J penalty reduction service is further strengthened by our rich asset based such as ACA compliance best practices and knowledge artifacts, diagnostic toolkits, review checklists and structured methodologies.

Our Service Offerings

ACA Compliance Solution Services provides a full-scale offering that includes:

Diagnosis and Gap Identification

  • Understand Letter 226-J and other Forms received, and review ESRP penalties
  • Review benefits information and workforce data
  • Review Forms 1094-C and 1095-C filings and assess any inaccurate reporting or misrepresentation of exemptions claimed
  • Review safe-harbor codes
  • Identify and validate operational and data gaps
  • If needed, request extension to 30-day response deadline by contacting the 4980H Response Unit

Design Strategy

  • Perform redetermination and assess liability based on diagnosis
  • Apply appropriate safe-harbor codes
  • Update 1094-C and 1095-C schedules
  • Design long term strategy and plan to prevent recurrence of operational and data gaps

Craft and Deliver Response

  • Fill out Form 14764
  • Prepare response package and relevant documents
  • Send to IRS as per the procedure

ACA Mandate Enforcement: Letter 226-J & 227

What does an IRS Letter 226-J mean?

Now that the midterm elections are in the rearview mirror and a Democrat-controlled House has halted any imminent threats to the Affordable Care Act (ACA), it’s time to regroup and shed some light on common misconceptions about the health care law. If there’s one thing both sides of the aisle can agree on, it’s that the past nearly two years of the Trump Administration have been replete with health care confusion.

What are the types of penalties?

According to the ACA, there are two types of penalties: Penalty A is for ALEs who failed to offer health care coverage to its employees to at least 95% of employees (70% in 2015). Penalty B is triggered if the ALE has failed to make an offer of healthcare coverage that meets the minimum value and affordability requirements.  

Response to Letter 226-J Filed. What’s Next?

Whatever is your response, the IRS will acknowledge your response to Letter 226-J with Letter 227. The following are the versions of Letter 227:

  • Letter 227-J: Acknowledges receipt of the signed agreement Form 14764, ESRP Response, and that the ESRP will be assessed.
  • Letter 227-K: Acknowledges that the information in the Letter 226J response has been accepted and the case has been resolved to your satisfaction.
  • Letter 227-L: Acknowledges receipt of the information provided and shows the ESRP has been reduced.
  • Letter 227-M: Means that IRS disagrees with your clarification in Letter 226J response and reiterates its original proposed penalty.
  • Letter 227-N: Acknowledges the decision reached in Appeals and shows the ESRP based on Appeals review.
What should I do if I receive IRS Letter 226-J?

It’s important to note that Letter 226-J is not a bill. Treat this more like an inquiry letter and you have an opportunity for clarification. Read the letter carefully and note the deadline to respond, which is usually within 30 days. Consult your ACA compliance advisor who can help prepare a response. Review Form 14765 that is attached along with Letter 226-J and provides a summary of all calculations. You can either a) Accept the calculations mentioned in the letter, or b) Correct the information provided if you find factual errors, or c) Disagree that you owe anything altogether and proceed with appeals process as per the IRS process.

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