IRS Is Sending Proposed Assessments to Applicable Large Employers and We Can Help

Confirmed Wins for Clients

To date we have saved our clients over $600,000 in penalties. Examples include:

• Client “A” – original assessment >$20,000; final assessment = $0
• Client “B” – original assessment > $41,500; final assessment = $0
• Client “C” – original assessment > $10,000; final assessment = $0
• Client “D” – original assessment > $200,000; final assessment = $0
• Client “E” – original assessment > $33,500; final assessment = $1,620

Notices

IRS is sending Proposed Employer Shared Responsibility Payment (ESRP) letters (Letter 226J) to Applicable Large Employers (ALEs). 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 if either:

• The ALE did not offer Minimum Essential Coverage (MEC) to at least 95% of its full-time employees (and their dependents) and at least one full-time employee was certified as being allowed the PTC (the “A” Penalty); or
• The ALE offered MEC to at least 95% of its full-time employees (and their dependents), but at least one full-time employee was certified as being allowed the PTC because the coverage offered was unaffordable, did not provide minimum value, or that particular full-time employee was not offered coverage (the “B” Penalty).

When calculating the “A” Penalty, the ALE’s monthly full-time employee count is reduced by its allocable share of a statutory amount. Usually, this statutory amount is 30. If the ALE is a member of an aggregated ALE group, the statutory amount is allocated between group members.

The “A” Penalty for 2025 is $241.67 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 2025 is $362.50 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 Ellen at (954) 242-1200 for assistance in responding to your Proposed Employer Shared Responsibility Payment letter.