November 27, 2017
The IRS recently released sample versions of the Forms 14764 and 14765. While the IRS previously discussed these Forms in the sample Letter 226J, additional details were provided with the release of the specific Forms. This article describes the new details disclosed by the release of the Forms.
The Form 14765 will be partially completed by the IRS, but also will serve as the place an ALE member disputes and makes corrections for the assessable full-time employees. The Form provides a reminder that an ALE member only needs to be concerned with the months of an assessable full-time employee which are not highlighted. Therefore, if an employee listed has certain months highlighted, those are months for which the employee is not triggering any section 4980H penalty.
The Form 14765 will list an ALE member’s name, EIN, and the tax year in question in the top row (presumably of each page of the Form 14765). The IRS will also provide a list of each employee who was an assessable full-time employee for at least one month of the tax year in question. To be an assessable full-time employee listed on the Form 14765, the individual will need to satisfy each of the following three conditions:
- The ALE member filed a Form 1095-C on behalf of the full-time employee;
- The employee received a premium tax credit for one or more months for the tax year in question; and
- The ALE member did not report on the Form 1095-C an affordability safe harbor or another relief provision from the employer mandate penalties for one or more of the months the employee received a premium tax credit.
If the three conditions are satisfied, the employee and the last four digits of the employee’s SSN will be listed in the first two columns of the Form 14765. Next, the Form 14765 will have 13 columns which will be divided into 2 rows. The first of these columns is an all 12 months column and will only be used if the ALE member entered the same line 14 and 16 code combinations for all 12 months. The next 12 columns will be for each calendar month in the year and will be used if the ALE member entered more than one code combination on lines 14 and 16 for the tax year in question. The IRS will complete the first row for the appropriate columns using the line 14 and 16 code combinations the ALE member entered for the assessable full-time employee for the tax year in question.
If the ALE member determines that the code combination in the first row does not accurately reflect the employee’s situation, the ALE member will insert the new correct code combination in the second row for the calendar month. However, the sample Letter 226J instructs that if more than one code combination for lines 14 and 16 could apply, the ALE member is required to list the employee’s name, the applicable months, and the additional code combinations that could apply for each month in a signed statement. This is a departure from the Form 1095-C instructions and will add a great deal of complexity as a month will frequently have several line 16 codes that could apply. If the ALE member is attaching any additional information for the particular assessable full-time employee, the box in the far right column should be checked.
Only 10 employees will be listed on each page of the Form 14765 so an ALE member with hundreds of assessable full-time employees should expect a thick package included with the Letter 226J.
The sample Form 14764 provides a more detailed look at the tool all ALE members will use to respond to a Letter 226J. All ALE members will return the Form 14764 to the following IRS address:
- Department of the Treasury
- Internal Revenue Service
- Group 2219
- 7300 Turfway Road, Suite 410
- Florence, KY 41041
The opening lines of the Form will also provide the ALE member with the date by which it must respond and a phone number to contact if additional time is needed for a response.
In the first section the ALE member will complete it will provide the name, telephone number and the address (if the address has changed) of the person the ALE member would like the IRS to contact regarding the response. The Form allows the ALE member to enter two numbers for the contact person.
In the next section of the Form 14764 the ALE member will indicate whether it agrees or disagrees with the Letter 226J proposed penalty amount. If an ALE member agrees with the proposed penalty amount, an individual will print his/her name and position and sign and date the Form 14764. Before signing and consenting to any penalty payment it is prudent to contact an attorney as there are valid arguments that no employer mandate penalties can legally be assessed in 2015. Alternatively, if the ALE member disagrees in whole or in part with the Letter 226J proposed penalty amount, it should check the corresponding box.
The next section allows for the ALE member to describe the payment option it plans on using. As detailed in our previous article, there is a valid argument that no employer mandate penalties can be assessed in 2015. Therefore, all ALE members should check the “No payment” box. If an ALE member does elect to pay the penalty amount, it should check all payment options that apply to it.
Finally, and importantly, the Form 14764 includes a second page for the ALE member to authorize an additional person for the IRS to contact regarding the Letter 226J. If an ALE member would like an attorney to assist them in its appeal, the attorney should be listed in this section. The appeals process will require a deep understanding of the Forms 1094-C and 1095-C as well as the rules related to the eligibility for a premium tax credit. Therefore, most ALE members will benefit from having an attorney assist with the appeals procedure and that attorney should be listed on page 2 of the Form 14764.
The IRS has now released samples of all of the documents ALE members will receive if the IRS believes it owes an employer mandate penalty. Therefore, employers who did not complete the Form 1094-C and 1095-C accurately or opted to pay the employer mandate penalty should be receiving the Letter 226J packet any day. Any employer who is penalized will need to promptly respond to the IRS and most would benefit from contacting an attorney who is an expert with the Forms 1094-C and 1095-C. Moving forward, employers should place a heavy emphasis on the accuracy of the Forms 1094-C and 1095-C to avoid potential IRS issues in future years. Please contact us and we can share information regarding our proprietary software that will disclose each assessable full-time employee before you file or if you have any other questions regarding your ACA filing obligations.
About the author – Ryan Moulder serves as General Counsel at Accord Systems, LLC and is a Partner at Health Care Attorneys P.C. Ryan received his LL.M. from Georgetown University Law Center and his J.D. from Saint Louis University School of Law. He has distinguished himself as a leader in the Affordable Care Act arena and has written and spoken on a variety of ACA topics as it relates to compliance for companies.
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