Internal Revenue Service Will Be Contacting Employers Soon Regarding Assessment and Payment of Excise Taxes Under Affordable Care Act
The Affordable Care Act has two excise taxes for employers that either: (a) fail to provide sufficient number of full-time employees with appropriate health care coverage; or (b) fail to provide full-time employees with “affordable” health care coverage. Each employer with 50 or more full-time employees filed Internal Revenue Service (“IRS”) Forms 1094-C and 1095-C demonstrating its compliance with these health plan coverage rules.
Last week, the IRS announced that it would soon begin contacting employers that may owe excise taxes under the Affordable Care Act for the 2015 calendar year. The IRS will be sending employers a Letter 226J with an explanation of the excise taxes, itemizing the proposed excise tax assessment, and a Form 14764, for the employer’s shared responsibility response if it disputes the excise tax assessment. The employer’s response will be due thirty (30) days from the date of the IRS Letter 226J.
If an employer responds to the IRS Letter 226J, the IRS will acknowledge the employer’s response with a Letter 227 (which may take five different formats). If after receiving the IRS Letter 227, the employer still disagrees with the IRS’s proposed excise tax, the employer may request a pre-assessment conference with the IRS Office of Appeals. Generally, an employer will have thirty (30) days from the date of the IRS Letter 227 to request such a conference.
If an employer does not respond to the IRS’s Letter 226J or Letter 227, the IRS will assess the amount of the proposed employer shared responsibility excise tax and issue a notice and demand for payment, using IRS Notice CP220J. The IRS Notice CP220J will instruct the employer as to how to make its excise tax payment. The IRS states that installment agreements may be available and refers to its Publication 594.
Employers will want to alert their mailrooms to the importance of directing Internal Revenue Service Letters 226J and 227 to the appropriate HR staff members. The relatively short appeal period of thirty (30) days will make it difficult for many employers to research prior year data, and in this case – 2015 data, for appropriate responses to the IRS’s assessments of excise taxes.
If you have questions or comments regarding this matter, please do not hesitate to contact Kenneth M. Haneline or any other KWW attorney.