IRS Letter 226J – Coming soon, and only 30 days to act

November 29, 2017

If you are an Applicable Large Employer (ALE), you may soon be receiving Letter 226J from the IRS notifying your business or organization of possible liability for the Employer Shared Responsibility Payment (ESRP) for the 2015 tax year.  The preliminary calculations in this letter are based on information received from Forms 1094-C and 1095-C filed by the ALE, and the individual income tax returns filed by the ALE’s employees.

Briefly, an ALE is an employer that has at least 50 full-time and full-time-equivalent (part-time schedule converted to a full-time basis) employees on average during the prior year.

Be aware – while this letter is not a bill, it contains preliminary calculations of what could be owed for the 2015 tax year. ESRP payment amounts for the 2015 tax year are $2,080 and $3,120.  This letter is not to be ignored as the ALE will only have 30 days to respond with either an agreement, or disagreement of the calculations.

Do you Agree with the Calculations in the Letter? If after careful review of the letter and all related documentation, you agree with the findings, the following needs to be done promptly:

  • Complete, sign and date the Form 14764 response
  • Send it by the date indicated on page one of the letter
  • Payment should accompany the letter (electronic payment is also an option)
  • Maintain a copy of the IRS letter and any supporting documentation

Do you Disagree with the Calculations in the Letter? If you have analyzed the letter and documentation, and disagree with these calculations, these are the necessary steps to take as soon as possible:

  • Complete, sign and date the Form 14764 response
  • Include a signed statement explaining the areas of disagreement
  • Supporting documents must also be included which should be indicated by entering a check in the column on the Employee PTC “Additional Information Attached” listing
  • Do not file a corrected Form 1094-C, instead, any changes should be made on the Employee PTC Listing
  • Maintain a copy of the IRS letter and all supporting statements and documentation submitted

Regarding the response sent, you will receive an acknowledgement letter from the IRS that will provide their final determination.

Do not ignore this letter. If you do not respond to the 226J Letter in the time allotted, a Notice and Demand for the proposed amount will be sent to you by the IRS. The amount will be subject to IRS lien and levy enforcement action and interest will accrue from the date of the Notice and Demand until amount due is paid.

It is also important to note that the ESRP is not deductible for income tax purposes.

To read about ALEs, ESRPs, and reporting requirements, you can go to the Health Care Reform page of our site.  For more information regarding Employee Benefits for your organization, email Jason Della Penna, Senior Vice President at Brown & Brown Benefit Advisors at jdellapenna@advisorsbb.com.


Brown & Brown Benefit Advisors