IRS Pay or Play Penalties Are Here. How to Respond to IRS Letter 226J

Transcription

1 IRS Pay or Play Penalties Are Here How to Respond to IRS Letter 226J 1

2 Today s Hosts TANJA LUMPP HOLLY WAHL 2

3 Agenda Ø Intro / Overview Ø Refresher on Penalties Ø Review IRS Penalty Notice Ø Response Process Ø Questions 3

4 Introduction 4

5 What s Happening? The IRS has begun sending proposed assessment letters to employers who they ve identified as owing a penalty for 2015 Letter 226J notifies employers the IRS believes a penalty is owed Employers generally have 30 days to contest the assessment IRS will respond with Letter 227 acknowledging receipt of response and advising the employer of further actions it should take Five versions of this letter; samples have not yet been published Employer may request an Appeals conference with the IRS After conference, IRS may issue Notice CP220J formally demanding payment (due upon receipt) If employer still disagrees, it must pay tax and then file suit for a refund 5

6 Penalties 6

7 The A Penalty Applicable Large Employer does not offer Minimum Essential Coverage to substantially all full-time employees Defined as 95%, yet generally 70% in 2015 At least one full-time employee gets a Premium Tax Credit (PTC) through the Marketplace Employee household income is <400% of Federal Poverty Level Penalty = $2,080 x the total number of full-time employees Excluding the first 30, yet generally 80 in

8 The B Penalty Applicable Large Employer does offer Minimum Essential Coverage to substantially all full-time employees Defined as 95%, yet generally 70% in 2015 Coverage is considered unaffordable to one, some or all employees Cost is >9.56% of employee s income, or Coverage does not meet minimum value At least one full-time employee gets a Premium Tax Credit (PTC) through the Marketplace Employee household income is <400% of Federal Poverty Level Penalty = $3,120 x the number of full-time employees receiving a premium tax credit 8

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13 Line 14 Code Series 1 Use codes based on actual offers of coverage, per month Used to inform the IRS what type of coverage was offered CODE DESCRIPTION 1A MV offered to EE at less than 9.5% of FPL; at least MEC offered to Spouse & Dependents 1B MV offered to EE only 1C MV offered to EE; at least MEC offered to Dependent Children (no spouse) 1D MV offered to EE; at least MEC offered to Spouse (no dep children) 1E MV offered to EE; at least MEC offered to spouse & deps 1F MEC that is not MV offered to employee ( skinny plans ) 1G Self-funded MEC offered to non-ft EE: part-time EE, COBRA beneficiary, retiree (skip 15 & 16) use only if EE was not a FT EE for ANY month 1H No offer of coverage to EE 1I No offer of coverage to EE ER Using Qualifying Offer Transition Relief 13

14 Line 16 Code Series 2 Used to explain why an ALE is not subject to a penalty for this EE for a particular month CODE DESCRIPTION 2A Not employed any day that month 2B Part-time or termination month when not offered coverage for the full month 2C Enrolled in coverage all month (use over any other code) 2D EE in 4980H(b) limited non-assessment period (waiting period, initial measurement period) only if coverage at end of period is of minimum value 2E Multi-employer plan interim relief 2F W-2 Safe Harbor 2G FPL Safe Harbor 2H Rate of Pay Safe Harbor 2I Non-calendar year plan employer transition relief applies to EE 14

15 IRS Penalty Notice 15

16 What s in Letter 226J? Letter sent to employers to notify them the IRS has performed a preliminary calculation of the amount owed Table outlining the proposed penalty amount, by month Listing of employees who received a Premium Tax Credit (PTC) [Form 14765] Employer response form [Form 14764] IRS Contact Info Gives the employer an opportunity to provide corrected information to the IRS prior to them issuing a demand for payment Employers generally only have 30 days to respond! 16

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19 Doe, John 9999 Doe, Jane H / 1H / 1H / 1H / 1H / 1H / 19

20 Response Process 20

21 If an extension is granted, get confirmation in writing! 21

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24 Doe, John 9999 Doe, Jane H / 1H / 1H / 1H / 1H / 1H / Corrections are to be made on the second line of each employee. Enter the revised codes for Lines 14 and 16, separated by a slash (e.g. 1H/2A ). 24

25 Then What? IRS will acknowledge the employer s response to Letter 226J by sending a version of Letter 227 Five versions of Letter 227; samples have not yet been published Letter 227 will advise the employer of further actions it may need to take If the employer disagrees, it may request a pre-assessment conference with the IRS Office of Appeals (instructions included with the letter) Employers will generally have 30 days to respond After conference, IRS may issue Notice CP220J formally demanding payment (due upon receipt) If employer still disagrees, it must pay tax and then file suit for a refund 25

26 Summary IRS Sends Letter 226J IRS Sends Notice CP220J (demand for payment) Employer Makes Payment Employer Responds with Forms & IRS & Employer Conduct Conference Employer Files Suit in Court for a Refund IRS Sends Letter 227 (5 versions) Employer Requests an Appeals Conference 26

27 Questions 27