IRS Notice CP 220J
Available at https://www.irs.gov/pub/notices/cp220j_english.pdf
The IRS has released sample Notice CP 220J, which will be used to notify applicable large employers (ALEs) that the IRS has charged them, for one or more months, an employer shared responsibility payment (ESRP)—the Code § 4980H penalty that may be assessed against ALEs that fail to offer adequate health coverage to full-time employees and their dependents. The Notice follows last year’s release of Letter 226J (initial letter notifying ALEs of proposed ESRP) (see our Checkpoint article) and Forms 14764 (ALE’s response to proposed ESRP) and 14765 (list of employees receiving premium tax credit) (see our Checkpoint article). ALEs may use Form 14765 to change information previously reported on Forms 1095-C, potentially reducing or eliminating their ESRP liability. The IRS noted in Letter 226J that it would review information submitted by ALEs and contact them, or would send non-responding ALEs a notice and demand for the proposed ESRP.
The sample Notice indicates that it is for the tax period ending December 31, 2015, and states an amount due of $0. (Presumably, this is just for purposes of the sample document and explains why the Notice also states that the ALE does not owe the IRS any money. Actual notices are expected to include a dollar amount, with instructions for making payments, and omit the statement that money is not owed.) The Notice provides summary information about the ESRP, including circumstances that can trigger liability, and it describes steps the ALE can take to challenge the ESRP. A reminder is included that the ESRP is not deductible for federal income tax purposes.
EBIA Comment: Release of the Notice came with little fanfare, but it is the logical progression of the IRS’s attempts to collect Code § 4980H penalties for the 2015 tax year. ALEs receiving the Notice should already have received a Letter 226J and hopefully were able to make any necessary changes to their prior reporting to minimize their ESRP liability: They will want to confirm that the IRS made appropriate adjustments to their ESRP. It should also be noted that the IRS’s description of the ESRP is incomplete—lacking information, for example, about the transition relief exempting eligible ALEs with fewer than 100 full-time and full-time-equivalent employees from ESRP liability for 2015. Finally, release of the Notice provides a timely reminder of the deadlines for filing 2017 forms with the IRS (February 28, 2018, for paper filers and April 2, 2018, for electronic filers) and for furnishing Forms 1095-C to employees (extended to March 2, 2018—see our Checkpoint article). 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)”). See also EBIA’s Form 1094/1095 Workbook at Section XV (“Penalty Assessment”). 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.