The Affordable Care Act commonly known as the law that created Obama Care or health care requirements for most Americans contained several tax provisions that are currently being enforced by the IRS. The IRS recently started issuing proposed assessments via IRS Letter 226-J to Large Employers who may be liable for an Employer Shared Responsibility Payment frequently referred to as ESRP. The IRS is generating the proposed penalty assessments from information provided on IRS Forms 1094-C and 1095-C filed by the Large Employers and the individual income tax returns, such as Form 1040, by the employees of the Large Employers.
Employer taxpayers may challenge the Employer Shared Responsibility Payment proposed assessment by submitting a Form 14764 with an explanation of the facts and legal support for disagreeing with the proposed assessment. The IRS will reply with one of the IRS Letter 227s depending on its response to the employer taxpayer. In the event an employer taxpayer is in receipt of an IRS Letter 227-M, then there is a limited time frame of 30 days to Appeal the IRS decision not to change the Employer Shared Responsibility Payment assessment. In the event more time is needed to challenge the position, an employer taxpayer may request an additional 30-day extension to respond or prepare a Formal Written Protest. It is important to confirm in writing that an extension has been granted or an employer taxpayer may lose out on its right to file a tax court petition or challenge the proposed assessment.
Large Employers are subject to these Employer Shared Responsibility Payment when the IRS suspects or believes that proper healthcare coverage pursuant to the Affordable Care Act was not offered to its employees. The first question that probably comes to most employers’ minds are whether they are considered a Large Employer for purposes of the Affordable Care Act and may be subject to the Employer Shared Responsibility Payment.
Generally speaking, an employer with 50 or more full-time employees is considered a Large Employer. However, the calculation and treatment of who is considered an employee tends to get complex with the number of hours an employee works in a week, the number of hours worked by non-full-time employees (aka full-time equivalent employees), aggregating treatment of related entities within an employer’s organizational structure, and several other factors that play into the formula of a Large Employer. However, there are several safe harbors or transitional relief that may be available for certain employers that wind up treated as a Large Employer. These safe harbors or transitional relief may vary by tax year and should be explored further with the assistance of a tax professional. Additionally, the IRS does not always calculate the penalty accurately and this alone may be a sufficient position to challenge the proposed assessment.
At the Law Offices of Moffa, Sutton, & Donnini, our primary practice area is tax law. We have defended clients, both individuals and businesses, against the Internal Revenue Service, Florida Department of Revenue, and other government entities or agencies for over twenty years. Call our office and ask to speak with Michael Anidjar, CPA, Esq. our federal tax director with any issues related to the IRS or federal tax laws.
About the Author: Mr. Anidjar is licensed to practice law in both Florida and District of Columbia. In addition, Mr. Anidjar has been a Florida licensed CPA since 2008. Mr. Anidjar is currently the federal tax director at the Law Offices of Moffa, Sutton, & Donnini, PA, heading up both the federal tax practice and probate and estate planning. Mr. Anidjar received his Master of Laws in Taxation (LL.M.) at Georgetown University Law Center and has been awarded the prestigious honor of Rising Star by SuperLawyers each year since 2015.