Responding to IRS Letter 226J
Starting in November The IRS began sending letter 226J for the collection of potential Employer Shared Responsibility penalties. These penalties are most commonly associated with employees receiving an Exchange subsidy. We anticipate additional rounds of letters to be issued in the weeks ahead. It is entirely possible your client may receive a letter simply based on a mistake or miscalculation on the IRS part. In all cases it is important that you respond within 30 days from the date it was issued or face unnecessary penalties. For this reason, it is recommended checking mail rooms to see if any IRS notices have been received to cut down on any time lag.
Responding to Letter 226J
Detailed instructions on how to respond can be found in the letter and on the IRS Website. You Respond in writing by either agreeing or disagreeing with the proposed employer shared responsibility payment. If you disagree with the proposed ESRP liability, you must provide a full explanation of your disagreement and/or indicate changes needed on Form 14765 (PTC Listing). Return all documents as instructed in the letter by the response date.
If you agree with the proposed ESRP liability, follow the instructions to sign the response form and return with full payment in the envelope provided.
If you disagree with the assessment we recommend you also gather back up documentation supporting your case. While your 1095 forms and filing records from previous years can provide some support, other materials such as enrollment or waiver forms can provide back up of an offer. Income records for the tax year may also be relevant to the repeal.
To date we are unaware of any of our clients receiving letter 226J but wanted you to be fully prepared in case it occurs. Feel free to send this letter along to your clients.