Form 14764 (ESRP Response); Form 14765 (Employee Premium Tax Credit (PTC) Listing)
The IRS has released Forms 14764 and 14765 in connection with preparing to assess the first-ever Code § 4980H employer shared responsibility penalties against applicable large employers (ALEs). The IRS recently updated Q&A guidance on employer shared responsibility to explain the procedure it will use to assess Code § 4980H liability for the 2015 calendar year—including the issuance of a Letter 226J, which is the initial IRS notification to an ALE of a proposed penalty amount (see our Checkpoint article). It has now released two forms that will be included with Letter 226J. Here are highlights:
Form 14764. This is the response form that the ALE completes to indicate its agreement with the penalty amount proposed by the IRS, or its disagreement with all or part of the proposed amount. If the ALE agrees with the proposed amount, it signs and returns the form in the envelope provided. Payment (whether full or partial) may be made by check or use of the electronic federal tax payment system (EFTPS). If the ALE disagrees with the proposed penalty liability, it must provide a full explanation of the disagreement and indicate changes, if needed, on Form 14765.
Form 14765. This form lists the ALE’s assessable full-time employees (individuals who for at least one month in the year were full-time employees allowed a premium tax credit and for whom the ALE did not qualify for an affordability safe harbor or other relief) and the indicator codes, if any, the ALE reported on lines 14 and 16 of each assessable full-time employee’s Form 1095-C. Any month not highlighted on the form is a month that the employee received a premium tax credit and no safe harbor or other relief was applicable, thus indicating that the employee is an assessable full-time employee (and the ALE is subject to a penalty for that employee) for that month. The ALE may make changes to Form 14765 (e.g., corrections to the indicator codes for an employee), if needed, and include this form along with its response on Form 14764, to indicate its disagreement with the proposed penalty amount. The IRS’s Understanding your Letter 226-J webpage explains that the IRS uses Forms 1094-C and 1095-C filed by the ALE and the individual income tax returns of full-time employees to identify those allowed a premium tax credit in order to compute the proposed penalty amount.
EBIA Comment: The IRS previously indicated that it would begin issuing Letter 226J to ALEs in “late 2017.” ALEs should be on close lookout for such correspondence, keeping in mind that a response is generally due 30 days from the date of the Letter 226J. In preparing a response, an ALE should review its 2015 Forms 1094-C and 1095-C to confirm that the information filed with the IRS was accurate. The IRS will acknowledge an ALE’s response to Letter 226J with an appropriate version of Letter 227—a series of five different letters that, in general, acknowledge the ALE’s response and describe further actions the ALE may need to take. The IRS has not yet released sample versions of Letter 227, or a sample Notice CP 220J—the notice and demand for payment that the IRS will use to assess the Code § 4980H penalty if an ALE does not respond to either Letter 226J or Letter 227. For more information, see EBIA’s Health Care Reform manual at Sections XXVIII (“Shared Responsibility for Employers (Play or Pay Penalty Tax)”) and XXXVI.D (“Information Reporting of Employer-Sponsored Coverage (Applicable Large Employers)”). You may also be interested in our recorded webinar “Get Ready for Form 1094/1095 Reporting for 2017” (recorded on 11/15/17).
Contributing Editors: EBIA Staff.