By - August 17, 2020

IRS’ Treasury Inspector General Recommends More Stringent Penalty Assessments

irs penalty

The IRS has been issuing penalty notice Letter 226J, which assesses penalties to employers for not complying with the ACA, about 18 months after filing.  In the past, most of the issues were caused by uncorrected data issues.

The IRS has been lenient on appeals, allowing employers to provide corrections and analysis to prove they have been complying. The IRS has also appeared reluctant to pursue separate employer penalties for failing to provide an accurate 1095-C.

Recently, the Treasury Inspector General for Tax Administration (TIGTA) issued a report entitled “Improvements Are Needed to Ensure That Employer Shared Responsibility Payments Are Properly Assessed.” The report can be found here.

The report states TIGTA’s concern about the IRS’s failure to assess Employer Shared Responsibility Payments (ESRP) penalties, which is the basis of Internal Revenue Code Section 4980H and made three recommendations. One of these recommendations pertained to when an employer disagreed with an IRS Letter 226J. The second pertained to when an employer failed to respond or follow up to the notice of assessment. The third pertained to procedures for churches.

Portions of the recommendations were redacted, making it challenging for us to determine whether the IRS will agree or disagree with the recommended actions. However, we feel that the continued scrutiny and review of the 226J process means there is ongoing oversight of a critical function for the IRS.



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