Understanding ESRP and What to do if You Receive IRS Letter 226j

If you’ve received IRS Letter 226j—an Employer Shared Responsibility Payment (ESRP) notice—you might be in a panic. Reading the words “noncompliance with Affordable Care Act (ACA)” and seeing a large dollar figure is sure to sound alarm bells ringing in your head!

Why do I owe? What’s the penalty? How can I fix this?

Don’t panic! Chances are, it’s a problem an ACA expert will be able to help resolve. In fact, we’ve eliminated over $2,700,000 in penalties for our clients! If you want immediate answers regarding your situation, contact us by completing the contact form, or by emailing Julie Kniseley directly to discuss your situation. You can also reach us by calling 888-387-6851.

Here’s what you need to know and what you can do to put your ACA penalty into better perspective.

Check your forms

Count your employees properly and make sure you fill the form out correctly. Miscounting your full-time employees can result in significant penalties.

• We worked with one client that faced more than $800,000 in penalties over two separate years—just for miscounting employees. In both years, we helped correct their forms and eliminated their penalties entirely!

Check the boxes

A common trigger for IRS Letter 226j occurs when employers forget to check off a box on their filings. Finding the missing checkbox and explaining the situation to the IRS could reduce or eliminate your ACA penalty.

• One of our clients missed a single checkbox on their forms, triggering a $200,000 fine. Discovering this error, we worked with the IRS to remedy the situation in just under two weeks, with nothing owed.

Check your records

See how many full-time employees you have vs. part-timers and contractors. Then, review this against the ACA rules for small businesses to see if you’ve filed incorrectly. A mistake here could drastically change the landscape of your ESRP.

• We worked with a multiple-entity client to take their whopping $550,000 penalty down to $6,000, simply by navigating the different filings of their 20 businesses and explaining the proper entity structure to the IRS.

Get help!

If you’re staring down IRS letter 226j, know you’re not alone—many businesses receive this unpleasant surprise in the mail. Contact James Moore’s HR Consulting Team for more information about how to reduce or eliminate your ACA penalty and get your business back in good standing with the IRS.