How to Respond to Letter 5699 or Letter 226-J
This post is for Applicable Large Employers (ALEs) required to comply with the Affordable Care Act. We hope you find it useful.
We’ve helped many companies that have received an IRS warning letter or ACA penalty notification, such as IRS Letter 5699 or Letter 226-J.
Letter 5699 is a notification regarding “Missing Information Returns” (forms 1095/1095-C), and Letter 226-J is a notification that you have been assessed an Employer Shared Responsibility Provision (ESRP) penalty under the ACA.
Our ACA software and services can help you simplify and comply with the ACA to avoid costly penalties. We also provide penalty response consultation and have helped many companies avoid or drastically reduce penalties.
Letter 5699, also known as the “Missing Information Return” letter, asks companies to provide Information Returns or confirm their filing details for a specific tax year. Penalties can be steep, so it is important to respond in a timely manner.
Prepare for your response by gathering your documentation of employee records and offers of coverage. This data should include offers of coverage dates, enrollment dates, and contribution amounts. You should be able to prove that you met the IRS affordability thresholds and that you identified full-time employees correctly.
– Ascertain whether you filed under a different EIN
– Ensure that you calculated your full-time equivalents correctly
– Inform the IRS if you are not an Applicable Large Employer
– If you failed to file, include a timeline for your submission. If you complied with the reporting guidelines, provide the IRS with a certified mail receipt/tracking information, or Receipt ID for electronic files.
Our comprehensive ACA software and services aggregate your ACA-related data in one silo to simplify data management. This makes gathering documentation easy, in order to help you effectively respond to an IRS notification letter or penalty notice.
The 226-J letter penalty notification states that you failed to comply with the ACA Employer Shared Responsibility Provision (ESRP). Letter 226-J will indicate:
– The tax year of the violation, contact information, and the response deadline
– A penalty amount with written explanation
– An itemized ESRP summary table with explanation
– Form 14764—your response, including whether you accept or disagree with the penalty
– Form 14765—the Employee Premium Tax Credit Listing, which indicates your employees’ reported 1095-C information and months where penalties were assessed
The 4980H(a) penalty is issued when an ALE does not offer affordable, qualifying coverage to at least 95% of its full-time employees. If you did not meet that threshold, the penalty (indexed each year) is multiplied by the total number of full-time employees.
The 4980H(b) penalty is triggered when an ALE does not offer qualifying coverage to a full-time employee, the employee enrolls in coverage on the exchange, the employee receives the Premium Tax Credit on their tax return.
Passport Software’s ACA software solution or ACA Full-service option can help you simplify compliance management year-round to avoid costly penalties.
If you’ve received an IRS notification or penalty letter, we can help guide you through the entire response process. Our penalty response consultation services have helped many companies avoid or drastically reduce penalties.
Passport Software’s IRS-certified ACA software streamlines filing and compliance management year-round, and we are IRS-approved for optional proxy submission for our software users. Our ACA Full-service option is the easiest. Just provide a spreadsheet with employee data and we do it all for you year-round, including filing.
Our friendly experts can help you navigate ACA compliance management and answer any ACA-related questions you might have.