What I need to do if I disagree with the proposed ESRP in Letter 226J?
440 views | Last modified 1/11/2021 12:22:51 PM EST | Added by ACAwise Team

You will generally receive the 226J letter from the IRS if they evaluate you are not compliant with the ACA employer mandate as an Applicable Large Employer that had an average of 50 or more full-time employees (including full-time equivalent employees) during the preceding calendar year.

So, it's very important to determine whether you are an ALE to comply with the ACA employer shared responsibility provision. To check out your ALE status, you can use our ALE status Calculator that instantly tells you whether you are an ALE or not to agree with the proposed ESRP in Letter 226J.

ALE status

In determining your ALE status, if 

• The result is less than 50. You are not an ALE and not responsible for complying with the ACA employer mandate. You can disagree with the proposed ESRP by responding to the IRS with proper documents. 
• The result is greater than 50. You are an ALE, and the proposed penalty amount received in Letter 226J is appropriate to you, respond to it accordingly. 

However, as an ALE, if you disagree with the proposed ESRP in Letter 226J, here's what you need to do:

If you disagree with the proposed ESRP

• Complete, sign, and date the enclosed Form 14764, ESRP Response, and send it to IRS within the Response date on the first page of this letter. 
• Include a signed statement describing why you disagree with part or all of the proposed ESRP. You may include documentation supporting your statement. 
• Make sure your statement describes changes, if any, you want to make to the information reported on your Form(s) 1094-C or Forms 1095-C. Please note, do not file a corrected Form 1094-C with the IRS to report any changes you want to make to your Form 1094-C filed for the tax year shown on the first page of this letter. 
• Make changes, if any, on the Employee PTC Listing using the indicator codes in the Instructions for Forms 1094-C and 1095-C for the tax year shown on the first page of this letter. Please note, do not file corrected Forms 1095-C with the IRS to report requested changes to the Employee PTC Listing; and 
• Include your revised Employee PTC Listing, if necessary, and any additional documentation supporting your changes with your Form 14764, ESRP Response, and signed statement.

But, please note whether you agree or disagree, you must make your response to the letter within 30 days from the date of the Letter 226J Penalty Notice. If you don't respond, you'll owe the ESRP amount stated in the letter, and the IRS will send you a Notice and Demand for Payment.

If you think responding to it is an overwhelming task in your busy schedule and continue to ignore the notices, it will end up paying millions of dollars to the IRS. So, don't get blindsided by IRS penalties, connect with ACAwise at (704)-954-8420 or email your concerns along with the notice you have received to [email protected]. We offer a free assessment of your options and instructions to proceed further and save you from the unwanted penalties.