IRS Announces Procedures for the Assessment and Payment of Excise Taxes Under the Employer Shared Responsibility Mandate

From Savoy Benefits  11/9/2017 :


Basics of the Employer Shared Responsibility / Play or Pay MandateStarting in 2015, employers with at least 50 full-time including equivalent employees, on average, in the preceding calendar year, are subject to the Employer Shared Responsibility provision of the Affordable Care Act (ACA). All union, part-time, variable hour and seasonal employees are counted to determine the 50 threshold as well as are any affiliated companies as determined by IRC 414 (b), (c), (m) or (o). Such an employer is known as an Applicable Large Employer (ALE).If an ALE does not offer at least Minimum Essential Coverage (MEC) or does not offer affordable minimum value coverage to their full-time employees and their dependents to age 26, the employer may be subject to a tax assessment if at least one full-time employee receives a premium tax credit from an exchange marketplace. Individuals are eligible for a subsidy if their household income is up to 400% of the Federal Poverty Level, they are not eligible for Medicare or Medicaid, and are not enrolled in the employer’s health plan.Employers who have been counting on the IRS not to enforce the employer shared responsibility payments must be aware that the IRS issued new FAQs on November 2nd outlining upcoming issuance of penalty demand letters in QA 55-58. The IRS FAQs can be found HEREQA 55 – How does an employer know that it owes an employer shared responsibility payment?According to QA 55, the IRS plans to issue Letter 226J to affected ALEs. The letter will include:

  • A summary table itemizing each month an employer may be liable for a payment
  • A response form, Form 14764, “ESRP Response”
  • Form 14765 which will list by month an ALE’s assessable full-time employees
  • A description of actions the ALE employer should take to dispute the letter’s findings

Letter 226J will include a due date for the employer’s response. It will generally be 30 days from the date of the letter. If an employer does not respond or does not respond timely, the IRS will issue a notice and demand for payment, Notice CP 220J.The IRS states that Letter 226J for calendar year 2015 will be issued in “late 2017.” Click HERE for further details on understanding Letter 226J.QA 56 – Does an employer who receives a Letter 226J proposing an employer shared responsibility payment have an opportunity to respond to the IRS about the proposed payment, including requesting a pre-assessment conference with the IRS Office of Appeals?Yes. ALEs will have an opportunity to respond to Letter 226J before any employer shared responsibility liability is assessed and notice and demand for payment is made. Letter 226J will provide instructions for how the ALE should respond in writing, either agreeing with the proposed employer shared responsibility payment or disagreeing with part or all or the proposed amount. If the ALE responds to Letter 226J, the IRS will acknowledge the ALE’s response to Letter 226J with an appropriate version of Letter 227 (a series of five different letters that, in general, acknowledge the ALE’s response to Letter 226J and describe further actions the ALE may need to take). If the ALE does not respond to either Letter 226J or Letter 227, the IRS will assess the amount of the proposed employer shared responsibility payment and issue a notice and demand for payment, Notice CP 220J. The IRS allows a 30-day period to respond.QA 57 – How does an employer make an employer shared responsibility payment?If, after correspondence with the IRS or a conference with the IRS Office of Appeals, it is determined that an ALE is liable for an employer shared responsibility payment, they will issue a notice and demand for payment, Notice CP 220J. Notice CP 220J will include a summary of the payment. For payment options, such as entering into an installment agreement, refer to Publication 594, The IRS Collection Process. The general steps from billing to collection are outlined below:

  1. If you owe taxes, we will send you a bill. This is your first bill for tax due. Based on your return, we will calculate how much tax you owe, plus any interest and penalties.
  2. If you don’t pay your first bill, we will send you at least one more bill. Remember, interest and penalties continue to accrue until you’ve paid your full amount due.
  3. If you still don’t pay after you receive your final bill, we will begin collection actions. Collection actions can range from applying your subsequent tax year refunds to tax due (until paid in full) to seizing your property and assets.

QA 58 – When does the IRS plan to begin notifying employers of potential employer shared responsibility payments?For the 2015 calendar year, the IRS plans to issue Letter 226J informing ALEs of their potential liability in late 2017.This means that notices will be issued within the next 7 weeks.