IRS ACA 227 Letters Explained
If you have received a 227 letter from the IRS below is an explanation of it’s purpose and next steps as directed on the IRS website:
The various Letters 227 are acknowledgement letters sent to close an ESRP inquiry or provide the next steps to the Applicable Large Employer (ALE) regarding the proposed Employer Shared Responsibility Payment (ESRP). There are five different 227 letters:
- Letter 227-J acknowledges receipt of the signed agreement Form 14764, ESRP Response, and that the ESRP will be assessed. After issuance of this letter, the case will be closed. No response is required.
- Letter 227-K acknowledges receipt of the information provided and shows the ESRP has been reduced to zero. After issuance of this letter, the case will be closed. No response is required.
- Letter 227-L acknowledges receipt of the information provided and shows the ESRP has been revised. The letter includes an updated Form 14765 (PTC Listing) and revised calculation table. The ALE can agree or request a meeting with the manager and/or appeals.
- Letter 227-M acknowledges receipt of information provided and shows that the ESRP did not change. The letter provides an updated Form 14765 (PTC Listing) and revised calculation table. The ALE can agree or request a meeting with the manager and/or appeals.
- Letter 227-N acknowledges the decision reached in Appeals and shows the ESRP based on the Appeals review. After issuance of this letter, the case will be closed. No response is required.
What you need to do
- Read your letter and attachments carefully. These documents explain the next steps available and provide information on how the case will be resolved.
- If appropriate, complete the response Form 14764 indicating your agreement or disagreement. If you disagree with the proposed ESRP, you must provide an explanation of why you disagree and/or indicate changes needed on Form 14765. Return all documents as instructed in the letter by the response date. If you agree with the proposed ESRP, follow the instructions to sign the response form and return it with full payment in the envelope provided.
You may want to
- Review the information reported on Forms 1094-C and 1095-C for the appropriate year to make sure that the information provided was accurate because the IRS used that information to compute the ESRP.
- Review the information provided in response to the Letter 226-J to make sure it was used to compute the ESRP by the IRS.
- Keep a copy of the letter and any documents you submit.
- Contact us using the information provided in the letter if you have any questions or need additional time to respond.
- Send us a Form 2848 (Power of Attorney and Declaration of Representative) to allow someone to contact us on your behalf. The Form 2848 must state the year and that it is for the Section 4980H Shared Responsibility Payment.
Answers to Common Questions
- Why did I receive this letter?
The IRS used the information you provided in response to the initial Letter 226-J to review your ESRP. The Letter 227 version that you received explains the outcome of that review and the next steps to take to fully resolve the ESRP.
- Where did the IRS get the information used to compute the ESRP?
The IRS used Forms 1094/5-C filed and the income tax returns of your full-time employees to identify if they were allowed a premium tax credit. If changes to that information were submitted in response to a Letter 226-J, the IRS considered that information and, if needed, updated the proposed ESRP.
- Is this letter a bill?
No, the Letter 227 is not a bill. A CP220J, a bill, will be received after the ESRP has been assessed.
- What do I need to do?
Review the letter and attachments carefully and complete and return the Letter 227-L or 227-M by the date provided.
- What do I do if the information is wrong or I disagree?
Discuss your issues or concerns with the person working your case. Use the information provided on the letter to contact us or send us your questions in writing to the address shown on the letter.
- Do I have appeal rights?
Yes, the letter you receive will explain all of your rights, including your right to appeal.
For more info visit ACA information center for Applicable Large Employers.