The IRS has been issuing the 2017 Employer Shared Responsibility Penalty (ESRP) assessments (Letter 226-J). The Letter 226-J provides the IRS’ determination of whether an “applicable large employer” may be liable for an ESRP for a particular calendar year and shows the proposed assessment of the penalties based on the Forms 1094-C and 1095-C the employer filed with the IRS, as well as whether or not the employer’s employees received premium tax credits on their individual income tax returns. The employer has a certain time period to (i) agree with the assessment and pay the penalties; or (ii) disagree with all or part of the assessment (and remit all, part, or none of the proposed assessment, as applicable).
Importantly, we have noticed a trend in the receipt of the Letters 226-J by employers in which the letters are received very close to the deadline noted on the letters for response (sometimes received only 5 calendar days prior to the response deadline). We are not sure why this is happening but perhaps this is due to letters being held by the IRS and sent in a bulk mailing instead of as drafted by their agents. We highly recommend that upon receipt of a Letter 226-J an employer check the response deadline immediately and consider requesting an extension from the IRS by calling the number on the letter. In our clients’ experience, a one-month extension on the responses has been freely given by the IRS when requested.
For more information on the Letter 226-J, see https://www.irs.gov/individuals/understanding-your-letter-226-j.
