Why you should open letters from the IRS

It’s that time of year when the IRS starts rumbling again. But April 15 is the least of your problems if you have more than 50 employees, and get a certain IRS letter called the 226J.

If you open your IRS letter and it says Letter 226J in it, call your accountant immediately. This is the form that says that, according to the IRS, you did not comply with the ACA employer mandate requirements for the 2015 tax year.

You are responsible for offering ACA compliant coverage to your employees at a reasonable cost, compared to the wages of your lowest paid full time worker. If you did not offer affordable coverage to an eligible worker, and that worker instead buys his insurance on the healthcare exchange, you will be fined.

What this means is that one or more of your employees disregarded your employee health plan and signed up instead for a healthcare exchange plan. Those people may have qualified for a subsidy to help pay for their premiums, and Uncle Sam picked up the tab. And they’re sending you a demand letter for your failure to provide insurance along with penalties and interest.

You have 30 days from the date on the letter to respond to the IRS with your defense. Otherwise the IRS will assume that their numbers are correct and formally assess you and start collection activity.

If you have been cited in a Letter 226J, set out immediately to discover any errors or misstatements. And for heaven’s sake if you have not filed for tax year 2015, 2016 or
2017, submit filings immediately to minimize any further penalties. This is serious, and all the talk about “Obamacare is being dismantled”, or “the IRS is not auditing as much”, is just so much talk. The Service has full authority to pursue any company with 50 or more full-time or equivalent employees.

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