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IRS 226J letters: What they are and how to respond

Failure to comply with the ACA's individual mandate could bring a penalty letter from the IRS, but employers can take steps to remedy the situation.

By Michael Gomes | Updated on March 15, 2018
1095 Tax Form Common issues that could trigger a 226J letter include failure to select MEC indicator and a disconnect between the payroll vendor and benefits professional. (Photo: Shutterstock)

The Affordable Care Act (ACA) contains a requirement called the Employer Shared Responsibility Provisions (ESRP). This requirement is also referred to as the Employer Mandate. Under this mandate, Applicable Large Employers (ALEs) that have 50 or more employees (full-time or full-time equivalents) are required to offer coverage to the employee and children dependents. Failure to offer coverage can result in penalties.

Many ALEs have received Letter 226J from the IRS that indicates their proposed assessment of a penalty under the Employer Shared Responsibility Provision (ESRP) of Section 4980H of the Patient Protection and Affordable Care Act (ACA). These penalty calculations are based on data provided by employers to the IRS on Forms 1094 and 1095.

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