I received Letter 226-J from IRS. What should I do? – You got 30 days!

Receiving a notice from the IRS is always terrifying. If you receive Letter 226-J from the IRS, NEVER ignore! The IRS has started sending out the letter informing employers of their potential liability for an employer shared responsibility payment. If you are subject to the potential liability, you are receiving the letter in late 2017. Time to get panicked? Don’t worry, we got your back! Here is everything you need to know about Letter 226-J.


What is Letter 226-J?

Letter 226-J is the initial letter issued to Applicable Large Employers (ALEs), companies with 50 or more full-time or full-time equivalent employees, to notify them their potential liability failing to provide health coverage compliance with the Affordable Care Act’s Employer Shared Responsibility Payment (ESRP).

The determination of whether an ALE may be liable for an ESRP and the amount of the proposed ESRP in Letter 226-J are based on information from Forms 1094-C and 1095-C filed by the ALE and the individual income tax returns filed by the ALE’s employees. In general, an ALE would be subject to a penalty fee if, for at least one month in the year, one or more of its full-time workers received a premium tax credit through ACA’s Health Insurance Marketplace because the ALE failed to provide ACA compliant health coverage.

When you receive this letter, whether you agree or not, you have to respond within 30 days, otherwise, interest begins to accrue and will continue to accrue until the entire balance is paid.


What you need to do

  • Read your letter and attachments carefully: These documents explain the ESRP process and how the information received affects the computation.
  • Complete the response form (Form 14764) indicating your agreement or disagreement with the proposed ESRP liability by the response date on the first page of the letter.

If you agree:

  • Complete, sign, and date the enclosed Form 14764, and return it to IRS by the response date
  • Include your payment: If you’re enrolled in the Electronic Federal Tax Payment System (EFTPS), you can pay electronically instead of by check or money order.
    • If you don’t pay the entire agreed-upon ESRP, you will receive a Notice and Demand (your “bill”) for the balance due.
    • We will begin the collection process if you do not make payment in full and on time after you receive your bill.

If you disagree:

  • Complete, sign, and date the enclosed Form 14764, and send it to IRS by the response date
  • Include a signed statement explaining why you disagree with part or all of the proposed ESRP. You may include supporting documentation.
  • Make changes, if any, on the Employee Form 14765 (PTC Listing) using the indicator codes in the Instructions for Forms 1094-C and 1095-C for the tax year shown on the first page of this letter.
  • Include your revised Employee PTC Listing, if necessary, and any additional documentation supporting your changes with your Form 14764, ESRP Response, and signed statement.


I need more time!

When you receive a Letter 226-J, you may send an extension request to the IRS if you need more than 30 days to respond. However, it’s important that you contact the IRS right away. Also, keep in mind that you might not get too much time even if you request an extension.


What to expect to happen once you submit your response

The IRS will acknowledge the ALE's response with Letter 227, which describes further actions the employer may need to take.

If the employer disagrees with the proposed or revised assessment in Letter 227, the employer can request a pre-assessment conference with the IRS Office of Appeals. Conferences will generally take place 30 days from the date of Letter 227.


What happens if I don’t respond on time

If you don’t respond by the Response date, the IRS will send you a Notice and Demand for the ESRP. The ESRP will be subject to IRS lien and levy enforcement actions. Interest will accrue from the date of the Notice and Demand and continue until you pay the total ESRP balance due.

You may want to

  • Review the information reported on Forms 1094-C and 1095-C for the applicable year to confirm that the information filed with the IRS was accurate because the IRS uses that information to compute the ESRP.
  • Keep a copy of the letter and any documents you submit.


The ACA penalty process is not limited to 2015 filings: 

The IRS has an ACA penalty process in place to identify ALEs who either failed to comply with the ACA or made errors in the data submitted in annual Affordable Care Act Information Returns (AIRs). The IRS penalty review process will be ongoing and will include the 2016 tax year and future tax years. Expect that for future tax years, the IRS may be even more demanding of information to explain why your organization failed to comply with the ACA.



It’s important that you always respond to Letter 226-J as soon as you can, whether or not you agree with the proposed ESRP liability. The response to the letter is due by the response date shown on letter 226-J. Failing to respond will be similar to agreeing to the proposed penalty included in the letter. If you fail to respond or make a payment with your response Form 14764, the interest for the liability begins to accrue and will continue to accrue until the entire balance is paid. You are encouraged to contact IRS if you have any questions or concerns (usually the letter contains information of a specific IRS employee whom you can contact with). Also, BOR-GO can assist with ACA compliance for your company. If you need any help, please don’t hesitate to contact us!


Useful links


Written by Weena - HR Manager

Updated on September 12, 2018 22:09