IRS Begins Sending Out Penalty Notices

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Earlier this month, the Internal Revenue Service (IRS) quietly updated its “Frequently Asked Questions”  to announce it would begin sending out notices to inform employers about potential Employer Mandate liability for the 2015 calendar year.  The IRS will send Letter 226J if it determines that, for at least one month in the year, one or more of the employer’s full-time employees was enrolled in Exchange coverage, the employee claimed a premium tax credit and the employer did not qualify for an affordability safe harbor or other relief.  Shortly after the update, and just as quietly, the IRS officially began sending out notices.

With the Employer Mandate enforcement process now off and running, employers need to be ready to respond.  Advise mailroom staff to keep an eye out for these notices to ensure they get to the right person in a timely manner.   Remember, a response is due to the IRS by the date indicated on the notice, which will generally be 30 days from the date of the notice.  Employers using third-party vendors for tracking and reporting should work with their vendor to: (1) ensure the records for 2015 are readily accessible, including information about eligibility, offers of coverage, and affordability, and (2) to determine what services, if any, the vendor will provide to assist in responding to the IRS.  Finally, employers should consult with their legal counsel and tax advisor for guidance.

More information about the notice, how to respond and links to additional resources are available at Understanding your Letter 226-J.