ACA Penalty Letters Are On the Way – Are You Compliant?

aca penalty

The IRS Affordable Care Act (ACA) Enforcement Office, whose July 15, 2020 reopening was delayed until August, recently began sending IRS Letters 5699 to non-filers for the 2018 tax year. IRS Letter 5699 asks non-filing Applicable Large Employers (ALEs) for more information regarding why they failed or chose not to file. If it is determined they were supposed to file but didn’t, an IRS Letter 226J is sent that provides an assessment of the ALE’s noncompliance and proposed ACA penalty amount. ALEs, defined as those who employed at least 50 full-time equivalent employees in the previous calendar year, must be particularly vigilant in fulfilling their ACA responsibilities.

In addition to providing health coverage that is affordable and provides minimum value, the ACA requires ALEs to file information returns and furnish Form 1095-C to its employees. Currently, both failure-to-furnish and failure-to-file (or late filing) each have penalties of $280 per return, and ACA penalty amounts nearly double if non-compliance is ruled to be intentional. For example, an ALE who fails to file or distribute information returns for its 150 employees would be liable for an $84,000 penalty assessment. If the IRS deems the ALE’s non-compliance as intentional, that amount almost doubles to $165,000! The IRS ACA Information Center for ALEs can be found here.

With no indication that ACA and its requirements will be gone any time soon, employers looking to reduce their compliance risk should look no further than BASIC’s ACA Elevate. Our ACA compliance service offers peace of mind with access to robust materials prepared by compliance experts, file-ready Form 1095 generation, automatic e-Filing to the IRS, plus optional ACA corrections transmittal and mailing Form 1095-Cs directly to employees for ease of distribution. BASIC can handle preparation of Forms 1094-C and 1095-C with e-Filing for employers of all sizes and complexity– we’ve furnished over 1,000,000 1095-C Forms since 2015! The online ACA portal provides a variety of training videos and materials employers can access at any time.

Received a Letter 226J from the IRS? BASIC can help with that too! Don’t risk being non-compliant. Request an ACA Elevate proposal today!