Looking for the 411 on 226-J Letters? We’ve Got It!

An IRS letter
Looking for the 411 on 226-J Letters?

The IRS is sending restaurateurs letters stating they are being fined for not complying with the employer mandate piece of the health care law.

The IRS has added another regulatory challenge to the plate of issues restaurants deal with regarding the Affordable Care Act: a storm of tax notices for noncompliance of the law’s employer responsibility provisions.

The notices, called 226-J letters, have been going out since November 2017. More are expected.

Focus on larger employers

Large companies with 50 or more full-time employees are the targets. Aaron Frazier, our director of healthcare policy, says the IRS is sending letters to operators it claims haven’t provided acceptable employee health insurance options, properly submitted information, or collected proper paperwork from those employees.

“If a company is not meeting the IRS’ requirements to its specifications, it could be subject to a significant fine,” he says. “Employers are being charged $250 per employee, per statement, per day. That penalty adds up in a hurry.”

Frazier notes that at least one company received an IRS 226-J letter seeking as much as $20 million in penalties, but said the company fought the assessment with revised data and eventually ended up not having to pay a fine.

“The issue came down to an erroneous checkmark. The company submitted the right paperwork, provided all of the right offers of health coverage, shared the information with their employees, but simply neglected to check off one of the boxes on the volumes of documentation. That was enough to trigger a letter.”

The goal: Educating members and lawmakers

The healthcare expert says he and the Association are working to educate policymakers on Capitol Hill about the issue and finding a legislative fix for this IRS reporting issue, as well as how best to address the fines and improve the reporting system so it’s not so antiquated and challenging to deal with. He also is asking industry members to engage in grassroots advocacy work.

He says existing bipartisan legislation was introduced in October 2017, but the task now is to get lawmakers to support its passage. The key, he adds, is for restaurateurs — their constituents — to speak out.

“We’ve gotten word from House leadership that they want their members to know about and understand this issue so it will have a groundswell of support if it comes up,” he says. “Investing your time now will save money later. You can work on this issue with your state restaurant association, with us and with your member of Congress. This is urgent, and needs to be addressed.”