The IRS has posted a sample of Notice CP220J, which it will use to notify applicable large employers (ALEs) that it has charged them an employer shared responsibility (ESR) payment under the Affordable Care Act (ACA). The IRC §4980H penalty, also known as the ESR payment, may be assessed against ALEs that fail to comply with the ACA’s requirements to offer health insurance coverage to their full-time employees. The notice, as well as a short guide for understanding it, are available on the IRS website.
The IRS’s release of sample Notice CP220J follows last December’s planned release of Letter 226J, which is the initial letter notifying ALEs of an ESR payment. In late 2017, the IRS announced that it planned to issue Letter 226J informing ALEs of their potential liability for an ESR payment for the 2015 calendar year. If the ALE does not respond to the letter, or if after communicating with the ALE, the IRS determines that an ALE is liable for an ESR payment, the IRS will assess the ESR payment and issue a notice and demand for payment, Notice CP220J.
The sample Notice CP220J includes an amount due, an explanation of why the ESR payment was charged, details about how the payment was calculated (including transition relief in effect in 2015), and instructions for making payments. The sample notice details the next steps for an employer to follow. It is important to note that the IRS will assume an employer agrees with the penalty if the employer does not contact the IRS.
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