Now that we’ve passed the halfway point in 2022, it appears the IRS is on track to meet its goal of clearing the historic backlog by the end of the year. The agency has begun auditing ACA filings for the 2020 tax year and is now issuing the non-filing notice, Letter 5699.
Letter 5699, also known as “Missing Information Return Form 1094/1095-C,” is a warning sent to businesses. If employers do not take prompt action, a Letter 226J penalty notice may be issued.
The IRS sends Letter 5699 to Applicable Large Employers (ALEs) who it believes failed to file applicable ACA Forms 1094-C and 1095-C for a specific tax year as required by the ACA’s Employer Mandate.
Employers with 50 or more full-time employees and full-time equivalent employees must comply with the ACA’s Employer Mandate.
Provide Minimum Value and Minimum Essential Coverage to at least 95 per cent of full-time employees (and their dependents).
Ensure that the full-time employee’s coverage is affordable using one of the IRS-approved methods for calculating affordability.
The 2020 Letter 5699 instructs employers to verify their ALE status for the 2020 tax year and provides a series of responses from which to choose.
The IRS issuing Letter 5699 notices for the 2020 tax year, which coincides with new developments within the agency.
Among these new developments is the Biden administration’s request for $14.1 billion in discretionary funding for the IRS, which is more than $2 billion higher than the amount requested for 2021.
The additional funding will be used to improve the agency’s IT systems and processes for detecting ACA non-compliance, as well as other tax requirements.
Furthermore, thanks to a recent hiring surge of over 10,000 positions, many of which were IRS examiners in charge of auditing ACA filing submission, the agency is following the Treasury Inspector General for Tax Administration’s recommendation to improve processes for identifying ACA non-compliance.
If the IRS sends you a notice of an ACA penalty, please get in touch with Trusaic. Our services have helped our customers avoid ACA penalties totalling over one billion dollars.
The best practices recommend checking your ACA Vitals score even if you haven’t been penalised by the ACA yet in the form of Letter 5699 or another penalty.
With increased funding on the way, new tax examiners on board, and newly allocated personnel and resources, the IRS is on track to clear the historic backlog by the end of the year.
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Employers who are watching from the sidelines should be aware that the IRS enforcement activity we are seeing now is only the beginning, and more is on the way.
If you receive an ACA penalty notice from the IRS, please contact Trusaic. We have assisted our clients in avoiding over $1 billion in ACA penalties.
If you haven’t received a Letter 5699 or another ACA penalty, best practices recommend getting your ACA Vitals score. ACA Vitals assists you in identifying risk areas within your organization and directing you in the right direction for improving ACA compliance.
If your organization has received IRS Letter 226J, download our white paper on Letter 226J to learn best practices for responding to the penalty notice.
