What is an ACA Employer Mandate Penalty by the IRS?
3.2k views | Last modified 12/9/2021 11:58:17 PM EST


Under the Affordable Care Act, Applicable Large Employer (having 50 or more full-time or full-time equivalent employees) must offer minimum essential coverage that is affordable and provides minimum value to 95% of its full-time employees and their dependents. This is known as the Employer Mandate. 

If any Applicable Large employer fails to comply with the ACA employer mandate will be subject to ACA Employer Mandate Penalty from the IRS. 

Penalty Notice

To address this non-compliance, The IRS initially issues a Letter 226J with proposed penalties to those Applicable Large Employers to notify them that they are responsible for an Employer Shared Responsibility Payment (ESRP) under section 4980H.

The penalties are determined by IRS from the information provided by ALEs on Form 1095-C and 1094-C, along with the individual income tax returns filed by their full-time employees.

Employer Mandate Penalty for the tax year 2021

Employer Mandate    
Failure to Offer Minimum Essential Coverage under section 4980H(a)        $2,750
The Offer was Unaffordable under section 4980H(b)     $4,120


If you have already received a penalty notice from the IRS and don’t know how to respond to it, No worries, you can get in touch with ACAwise, our experienced professionals who can help you to:

  • Evaluate the penalty notices
  • Respond to IRS with acceptable reasons for late filing
  • Avoid paying unwanted penalties

To Know more about ACA penalties, check out here.

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