The IRS has announced that it will begin mailing employers letters informing them of their potential liability for a "pay or play" penalty for the 2015 calendar year in late 2017. However, before any penalty is assessed and notice and demand for payment is made, employers will have an opportunity to respond to the agency.
What Will the Letter Contain?
The IRS plans to issue Letter 226J to applicable large employers (ALEs)—generally those with at least 50 full-time employees, including full-time equivalent employees, on average during the prior year—if it determines that, for at least one month in the year, one or more of the ALE's full-time employees was enrolled in a qualified health plan for which a premium tax credit was allowed (and the ALE did not qualify for an affordability safe harbor or other relief for the employee). Letter 226J will include, among other things:
How Does an ALE Make a Pay or Play Penalty Payment?
If, after correspondence between the ALE and the IRS, the IRS determines that an ALE is liable for a penalty payment, the IRS will assess the payment and issue a notice and demand for payment, Notice CP 220J. That notice will instruct the ALE on how to make a payment, if any. Notably, an ALE will not be required to include a payment on any tax return that it files or make a payment before notice and demand for payment.
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