IRS Letter 5699, Missing Information Return Form 1094/1095-C, is used to make initial contact with an organization whom the IRS thinks is Applicable Large Employer (ALE). Therefore, that organization is required to file information returns under the Affordable Care Act (ACA). IRS Letter 5699 contains basic information such as:
- A contact e-fax number
- The tax year in question
- A contact telephone number
- The taxpayer identification number
- The date when IRS Letter 5699 was sent
- An IRS person to contact if you have any questions
What Is ACA Employer Mandate?
Applicable Large Employers (ALEs) organizations with 50 or more full-time employees and full-time equivalent employees must offer Minimum Essential Coverage (MEC) to at least 95% of their full-time employees and their dependents according to ACA Employer Mandate. Whereby this coverage is affordable for the employees and meets Minimum Value (MV).
Penalties for Non-Compliance with ACA Reporting
Failure to provide healthcare coverage as required by ACA can result in penalties under Internal Revenue Code (IRC) Section 4980H, which could be $3,860 per employee in the 2020 tax year. It is essential to address IRS Letter 5699 quickly and strategically. But the IRS can charge additional penalties for ALEs who fail to file Form 1094-C and Form 1095-C to the IRS.
These penalties can be extremely severe. The IRS may impose a penalty of $50 per information return, up to a maximum penalty of $565,000 for Forms 1094/1095-C due from specific government entities and large businesses in 2021, which are filed up to no more than 30 days late. If the information returns are filed after August 1, it increases to $280 per information return, up to a maximum penalty of $3,392,000.
What Are The Choices For Responding To IRS Letter 5699?
IRS Letter 5699 gives choices to the employers regarding their filing situation. IRS asks employers to either submit the delinquent forms with a response or explain when the returns will be submitted electronically. The Internal Revenue Service (IRS) also asks employers to provide the name, EIN, and filing date of the information returns. IRS Letter 5699 asks the employers whether:
- They had another reason not to file.
- They filed the forms with a different EIN.
- They should have filed the forms but did not.
- They were not an ALE and therefore did not have to file.
Contact a vendor with a proven track record in ACA compliance if you are unsure which scenario applies to you.
The Bottom Line
The best option to minimize the penalty risk for ALEs who did not report is reporting as soon as possible and responding to IRS Letter 5699 with an explanation. In the 2020 tax year, the Ogden office began issuing IRS Letter 5699 during the first week of September to non-filers for the 2018 tax year. It means that the Internal Revenue Service (IRS) will soon start issuing penalty letters, such as IRS Letter 226J, to employers that did not comply with ACA. Keep in mind that the IRS issued the Letter 226J penalty notices for the 2017 tax year in June 2019.
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