IRS Preparing to Send 2016 Obamacare Penalty Notices

Even as many applicable large employers (ALEs) grapple with Employer Shared Responsibility Penalty (ESRP) letters from 2015, the Internal Revenue Service (IRS) is preparing to issue more such letters — known as Letter 226-J — for 2015, with still more coming later this year for 2016.

IRS-offers-small-business-SHOP-reliefStill down the road later this year, the agency is prepared to go after individual taxpayers who received subsidies on Affordable Care Act (ACA, or Obamacare) policies that they weren’t qualified for. Such subsidies are based on an “honor system” by which the policyholder lists his projected income for the year.

Employers have 30 days to dispute an ESRP claim by filing Form 14764. After IRS review, the contesting employer will receive one of five letters, depending on the progression of the appeal:

  • Letter 227-J is a simple acknowledgment that Form 14764 has been received.
  • Letter 227-K will inform the employer that the IRS was wrong in its assessment and no penalty is owed.
  • Letter 227-L indicates that the employer was partially correct but still owes a portion of the assessment.
  • Letter 227-M is a blanket rejection, leaving the employer with no choice but to pay the fine or dispute the assessment further during a hearing with the IRS.
  • Letter 227-N is issued after an in-person hearing has been held and affirms the results of that hearing, whether positive or negative.

As of June, the IRS had issued more than 30,000 ESRP claims totaling some $4.3 billion in penalties, with more letters for 2015 still to be issued, along with an upcoming Letter 226-J onslaught for 2016.

NOTE: The details in this blog are provided for informational purposes only. All answers are general in nature and do not constitute legal advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The author specifically disclaims any and all liability arising directly or indirectly from the reliance on or use of this blog.
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