“Pay or Play” Tax Penalty Letters are coming by year end

Yes, Obamacare is still the law of the land (at least until the Congress changes the rules) and employers that did not come into immediate compliance will soon be receiving letters from the Internal Revenue Service (IRS).  The agency recently announced a plan to notify employers about potential liability for a “pay or play” penalty for the 2015 calendar year in late 2017.  Yes, you heard right – the calculation of penalties from over 2 years ago.  The only good news (if any) is that the IRS will provide employers with an opportunity to respond to the assessed taxes before any penalty is assessed – and the notice and demand for payment is made.

The IRS plans to issue Letter 226J to covered employers (Applicable Large Employers “ALE”) — those with at least 50 full-time employees, on average during the prior year —if it determines that, for at least one month in 2014, one or more of the company’s full-time employees was enrolled in a qualified health plan for which a premium tax credit was allowed, and no safe harbor was available.  The Letter 226J will include: (1) the assessed penalty (itemized by month), (2) the list of full time employees that were given premium tax credits  (if ALE did not have safe harbor), and (3) instructions on how to disagree with the assessment and the Form 14764 response form.  Employers will be given 30 days to respond.

What if your company owes a penalty?  The IRS will provide instructions on how to pay any assessed penalty.  Companies will not be required to include the payment on any tax return, or make the payment before it has been given the opportunity to receive the notice and demand for payment.  Read more from the IRS by clicking here.  If you want a second opinion about your penalty, give us a call.


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