The IRS has started to issue a new set of ACA penalty notices for failure to distribute 1095-C forms to employees and to file 1094-C and 1095-C forms with the federal tax agency by required deadlines under IRC 6721/6722.
These ACA Letter 5005A penalty notices are being sent using IRS Letter 5005A/Form 886A. These are different than the IRC 4980H penalties assessed in Letter 226J for not offering the required healthcare coverage.
To learn more about our Letter 226J Penalty Reduction Service, click here.
Like the penalties in Letter 226J, the penalties can be as high as several million dollars depending on the size of the employer.
These ACA 6721/6722 penalty assessments against an employer are calculated by the IRS using the employer’s W-2 count for the tax year as a proxy for the full-time employee count because the employer failed to file the 1094-C and 1095-C forms.
The penalty is supposed to be based of the 1095-C form count, but the W-2 is used as a proxy given that IRS did not receive the 1095-C forms from the employer. For a large majority of employers, the IRS penalty calculation process will dramatically overestimate the full-time employee count, and in turn, the penalty owed to the IRS.
In order to reduce the penalty assessment, your organization must move quickly to accurately determine your full-time employee count for the tax year and generate the correct 1094-C and 1095-C tax schedules. It is VERY important that the full-time employee counts be calculated accurately because the IRS can also issue penalties under IRC 6721/6722 for inaccurate filings.
This is where First Capitol can help.
First Capitol is prepared to mobilize quickly to help organizations respond to the IRS to significantly reduce the penalty assessments contained in IRS Letter 5005A/886A.
Our ACA 6721/6722 Penalty Reduction Service is a solution that payroll
and software vendors don’t provide.
First Capitol works with employers directly or in concert with their insurance brokers, CPAs or law firms.