To date we have saved our clients over $235,000 in penalties:
IRS has started sending Proposed Employer Shared Responsibility Payment (ESRP) letters to Applicable Large Employers (ALEs) for 2015 and 2016 (Letter 226J). These notices are triggered when at least one full-time employee has been allowed the Premium Tax Credit (PTC) on their individual tax return filed with IRS. ESRPs are assessed for 2015 if either:
When calculating the A Penalty, the ALEs monthly full-time employee count is reduced by its allocable share of a statutory amount. Usually, this statutory amount is 30, but if the ALE is eligible for transition relief for 2015 the statutory amount is 80. If the ALE is a member of an aggregated ALE group, the statutory amount is allocated between group members.
The A Penalty for 2015 is $173.33 per month per net assessable full-time employee (after reduction by the allocated statutory amount discussed above). The penalty amount is adjusted each year for inflation.
The B Penalty for 2015 is $260.00 per month per assessable full-time employee. The penalty amount is adjusted each year for inflation.
The ESRP is a penalty and cannot be deducted for income tax purposes.
These penalties add up quickly and ALEs should seek immediate assistance to respond to the 226J Letter within the required 30-day response period.
Ellen L. Joseph CPA Chartered specializes in Internal Revenue Code § 4980H - Shared responsibility for employers regarding health coverage and the related reporting requirements of Forms 1094-C and 1095-C. Please call (954) 242-1200 for assistance in responding to your Proposed Employer Shared Responsibility Payment letter.
** For 2016 and later years, this percentage changes from 70% to 95%