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Need Help with ACA IRS Letters 5698, 5699, 226J?

Hi, I’m Kim Phillips. I specialize in helping our clients reply to any IRS Inquiries and assisting them in compiling the information to mitigate any potential penalties.

The best way for you to get an idea of what you should be doing next is to give me a call or send me an email and I’ll contact you. We can have a brief conversation, at no cost or obligation to you, and I can outline your options. Call Kim Phillips 508-655-3307 or email kim.phillips@benefitscape.com.

Benefitscape provides this service to our Clients at no cost to you. Even if you’re not an existing client, we can help you reconcile the situation for a fraction of any potential penalties. Remember, time is of the essence, and if you do not reply within the required timeframe, you may forfeit the ability to mitigate certain penalties.

If you received Letter 5698 or 5699, the IRS is reminding you that they do not have a copy of your ACA 1094/1095 filing. If you have filed in a timely fashion, you will have to provide evidence. If you have not filed, you will be required to notify the IRS that you will be filing, providing a date and reasons for not filing originally. The penalties here are in conection with not filing the proper return in the required timeframe.

If you received Letter 226J, the IRS has received their filing and has calculated by the data available that there are either Penalties for Not Providing Coverage to those eligible, or providing unafordable coverage to someone who received a Subsidy from the Marketplace. In either case, your response has to be very fact-intensive to either dispute or confirm the assumptions made by the IRS.
As with any Notice from the IRS, time is of the essence. You should call the contact on the letter and explain that you are seeking the remedy the issue, and that you are preparing a response and ask for an extension of time to respond.

Next, you should seek professional assistance to guide you through the remediation process. Your response will have to be fact-intensive and is best left to professionals who have experience with this matter.
Once you have notified the IRS that you are preparing a response, you need to schedule a meeting with an expert to review the process. You can call Kim Phillips @ 508-655-3307; the call is free and there is no obligation. She will explain to you how we can help.
In this case, the insurance carrier will be providing a 1095-B form to employees, describing their coverage during the tax year. Because the carrier has provided this report, it has created a lot of confusion with Employers who believe they have satisfied the ACA Reporting Requirements. Unfortuately, this is not the case. The IRS requires the EMployer to separately required to file with the IRS the details of the Offers of Coverage made to all full time employees. This requirement also requires that each employee receives a 1095-C as well.
If you’ve received an IRS Letter 5699, or get one in the future, it’s IMPORTANT to respond as completely as possible within the IRS’s timeframe. You must respond within 30 days of the date of the IRS notice. Here’s how to respond:
  • If you were an Applicable Large Employer for the Tax Year of the notice:
    • Acknowledge that you were an ALE for that Tax Year, and that you DID FILE the required forms and provide the exact name and employer identification number (EIN) under which the forms were filed.
  • If you were an Applicable Large Employer for the Tax Year of the notice but DID NOT FILE with the IRS:
    • Contact BenefitScape IMMEDIATELY. We will work with you acknowledge to the IRS that you were an ALE for that Tax Year, and that you DID NOT FILE the required forms, but that you will file the forms. Provide the exact name and EIN under which the forms will be filed, and we will produce the forms and file them with the IRS.
  • If you were not an ALE for the Tax Year of the notice, declare the you were NOT AN ALE for the Tax Year referenced and provide the supporting reasons in the “Other” section of the IRS response form.
REMEMBER, if you haven’t filed your 1094 and 1095 forms, we can produce your filing, and eFile it with the IRS on your behalf for a FRACTION OF THE COST OF THE PENALTIES, and we’ll complete the filing within the required timeframe in most cases when the data is available. BenefitScape provides end-to-end ACA Compliance solutions to employers of all sizes, that fit within your budget. Call us at 508-655-3307, or email kim.phillips@benefitscape.com.
If you’ve received an IRS Letter 226J, or get one in the future, it’s IMPORTANT to respond as completely as possible within the IRS’s timeframe. You must respond within 30 days of the date of the IRS notice.

Letter 226-J is the initial letter issued by the IRS to Applicable Large Employers (ALEs) to notify them that they may be liable for an Employer Shared Responsibility Payment (ESRP). The determination of whether an ALE may be liable for an ESRP and the amount of the proposed ESRP in Letter 226-J are based on information from Forms 1094-C and 1095-C filed by the ALE and the individual income tax returns filed by the ALE’s employees. The penalties associated with an ESRP are significant. If you’re an ALE and did not offer health covergage that meets the Minimum Essential Coverage (MEC) to at least 95% of your Full Time employees (70% in Tax Year 2015) and one of your Full Time employees received a Premium Tax Credit for the cost of health coverage from an ACA Marketplace, you are subject to a penalty of $2,000 per full time employee less the first 80 employees for Tax Year 2015. The penalty is indexed so it is more in tax Years following 2018. Here’s what you need to do, BenefitScape can help with you with this process:
  • Read your letter and attachments carefully. These documents explain the ESRP process and how the information received affects the computation.
  • The letter fully explains the steps to take if you agree or disagree with the proposed ESRP computation.
  • Complete the response form (Form 14764) indicating your agreement or disagreement with the letter.
  • If you disagree with the proposed ESRP liability, you must provide a full explanation of your disagreement and/or indicate changes needed on Form 14765 (PTC Listing). You must return all documents as instructed in the letter by the response date.
  • If you agree with the proposed ESRP liability, follow the instructions to sign the response form and return with full payment in the envelope provided.
We recommend that we work with you to:
  • Review the information reported on Forms 1094-C and 1095-C for the applicable year to confirm that the information filed with the IRS was accurate because the IRS uses that information to compute the ESRP.
  • Archive a copy of the letter and any documents you submit.
  • Contact the IRS to resolve any questions and request any time necessary to respond.
  • Send a Form 2848 (Power of Attorney and Declaration of Representative) to allow us to contact us on your behalf.
BenefitScape provides this service at NO COST TO OUR EXISTING CLIENTS, and even if you haven’t worked with us in the past we will work you to resolve your current compliance issues with the IRS and get your organization on the right track for compliance in the future. REMEMBER, if you haven’t filed your 1094 and 1095 forms, we can produce your filing, and eFile it with the IRS on your behalf for a FRACTION OF THE COST OF THE PENALTIES, and we’ll deliver the forms and file with the IRS within the required timeframe in most cases when the data is available. BenefitScape provides end-to-end ACA Compliance solutions to employers of all sizes, that fit within your budget. Call us at 508-655-3307, or email kim.phillips@benefitscape.com.