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Copyright 2021 - All Right Reserved
Home ACA Penalties What You Need to Know About IRS Letter 5699
ACA Penalties


WHAT YOU NEED TO KNOW ABOUT IRS LETTER 5699

3 minute read
by Robert Sheen June 14, 2023
Robert Sheen June 14, 2023


Looking for ways your company can potentially save hundreds of thousands of
dollars? The IRS has recently handed it to you with their recently released IRS
Letter 5699, also known as the “Missing Information Return Form 1094/1095-C.”

It’s your wake-up call to either get your information filed, or explain why you
haven’t.

NEW RESOURCES SPURS INCREASED EMPLOYER SCRUTINY

The IRS has recently received significant resources, including $80 billion in
funding and 87,000 new tax agents. This influx of resources has led to increased
attention to tax compliance, particularly in relation to the Affordable Care Act
(ACA) Employer Mandate. 

The ACA employer mandate requires employers with 50 or more full-time equivalent
employees (FTEs) to offer Minimum Essential Coverage (MEC) to at least 95% of
their full-time workforce and dependents that meets the Minimum Value (MV)
required and that is affordable to employees.

Not all employers required to do so, have. The IRS is poised to clamp down on
them in significant ways and IRS Letter 5699 offers them the opportunity. This
notice serves as a warning to organizations that are believed to be Applicable
Large Employers but  have failed to file the required ACA filings. 

THE SIGNIFICANCE OF IRS LETTER 5699

Before sending employers a penalty notice, the IRS will issue Letter 5699. This
is a precursor letter asking employers to confirm their filing details for a
specific tax year. It could be considered a “heads up” that something might be
amiss that will require additional documentation—or, potentially, result in a
fine.

Fines can be significant. 

It’s a “gentle nudge” asking employers to respond indicating whether:

 * They may have filed the form under a different EIN.
 * They failed to file the forms.
 * They were not an Applicable Large Employer (ALE) so, therefore, were not
   required to file.
 * They had some other reason for not filing.

Depending on your response (or if you fail to respond), the IRS will follow up
with another letter or form to help determine if you are, indeed, non-compliant.

If you are, penalties may apply.

POTENTIAL ACA PENALTIES FOR NON-COMPLIANCE

Employers may face penalties if their coverage is determined to be either
unaffordable or does not provide minimum value, or if one or more FTE received
coverage through an exchange (when they should have been eligible through their
employer). Additional penalties apply if employers fail to file a report
indicating their level of responsibility for employee coverage if they are
considered to be an ALE.

Right now, the IRS is issuing Letter 5699 for the 2020 tax year. Each year is
considered independently, so penalties may multiply and employers may also be on
the hook for earlier years. In addition, when responding employers are being
asked to include how they did their calculations related to full-time and
full-time equivalent employees.

These calculations and related requirements can be both confusing and burdensome
and penalties can be steep. In 2023 the 4980H(a) penalty is $240—or $2,880
annually—per employee. If you’re not an ALE and can convince the IRS of that
within the required timeframe after receiving IRS Letter 5699 you have nothing
to worry about. If you are an ALE and fail to submit your reports or file late,
you may be subject to fines. Timely ACA compliance is important. 

RECOMMENDED NEXT STEP FOR EMPLOYERS

ACA penalties can be avoided. 

With the IRS becoming increasingly more aggressive in its ACA enforcement
efforts, timing is of the essence when responding to a penalty notice. Whether
you anticipate receiving a letter, or already have, we can help.

Get: ACA Vitals Score

To understand your organization’s current level of ACA penalty risk, get your
ACA Vitals score. The eight-question quiz can you help identify areas within
your business that can complicate the ACA compliance process.



Short URL of this page: https://acatimes.com/vgu



ROBERT SHEEN

Robert Sheen is Founder and President of Trusaic. Robert is a graduate of the
University of Southern California, in Business Administration with an emphasis
in International Finance. He earned his Juris Doctor from Loyola Law School, Los
Angeles, concentrating in Tax Law.




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