team of professionals going over finances with check book to record

Understanding IRS ‘Pay or Play’ Penalty Letters

Employers Have Opportunity to Respond Before ‘Pay or Play’ Penalty Assessment

The Internal Revenue Service (IRS) is currently issuing Letter 226-J to certain applicable large employers (ALE)—generally those with at least 50 full-time employees, including full-time equivalent employees, on average during the prior year—it believes owe a penalty for failing to comply with the Affordable Care Act’s employer shared responsibility provisions (“pay or play” provisions). In conjunction with Letter 226-J, employers will receive Form 14764, which they can use to respond to Letter 226-J. Employers who submit Form 14764 to the IRS will generally receive one of 4 letters back:

  • Letter 227-J, which acknowledges receipt of Form 14764 and the employer’s agreement to pay the penalty;
  • Letter 227-K, which acknowledges receipt of Form 14764 and shows that the penalty has been nullified;
  • Letter 227-L, which acknowledges receipt of Form 14764 and shows that the penalty has been revised; or
  • Letter 227-M, which acknowledges receipt of Form 14764 and shows that the penalty amount did not change.

For more information on IRS “pay or play” penalty letters, click here.

Visit our “Pay or Play” (Employer Shared Responsibility) section for more on pay or play compliance.

 

storm clouds overlooking city with lightning

6 Tips for Protecting Your Business Against Natural Disasters

FEMA Guidance on Protecting Company Documents and Equipment

As this week’s severe storms have demonstrated, natural disasters can happen suddenly at any time. It is prudent to take special precautionary steps to protect your company in the event of a natural disaster. The following actions are recommended by the Federal Emergency Management Agency (FEMA):

  1. Protect Business Records. Determine which on-site records, files, and materials are most important to normal business operations; consider their vulnerability to damage during different types of disasters (such as floods and hurricanes) and take steps to protect them (i.e., regularly back up vital electronic files and store copies in a secure off-site location).
  2. Know What Insurance Will Cover. Make sure you are aware of the details of your flood insurance and other hazard insurance policies, specifically which items and contents are covered and under what conditions. Check with your insurance agent if you have questions about any of your policies.
  3. Develop An Emergency Action Plan. Assign disaster mitigation duties to your employees. For example, some employees could be responsible for securing storage bins and others for backing up computer files and delivering copies to a secure location.
  4. Obtain Cost Estimates. Estimate the cost of repairing or replacing each essential piece of equipment in your business. Your estimates will help you assess your vulnerability and focus your efforts.
  5. Maintain Written Inventories. For both insurance and tax purposes, you should maintain written and photographic inventories of all important materials and equipment. The inventory should be stored in a safety deposit box or other secure location.
  6. Perform Building Evaluations. Periodically evaluate the building envelope to make sure that wind and water are not able to penetrate the building. Perform regular maintenance and repairs to maintain the strength of the building envelope.

The cost of these measures will depend on the size and contents of your business, the nature of the potential hazards, and the effort required to ensure proper protection. Click here for additional tips and information.

For guidelines on developing an emergency action plan to protect your employees and business during a disaster, visit our section on Planning for Workplace Emergencies.

 

lightning storm with purple sky over city

IRS Offers Tips To Help Businesses Prepare For Natural Disasters

Using Electronic Records and Documenting Valuables Encouraged

With hurricane season underway, the IRS is offering advice to those impacted by storms and other natural disasters. The following tips may help businesses prepare for such events:

  • Use electronic records. Businesses may have access to bank and other financial statements online. If so, their statements are already securely stored there. They can also keep an additional set of records electronically. One way is to scan tax records and insurance policies onto an electronic format. Businesses may want to download important records to an external hard drive, USB flash drive or burn them onto CDs or DVDs. Be sure to keep duplicates of records in a safe place. For example, store them in a waterproof container away from the originals. If a disaster strikes your business, it may also affect a wide area. If that happens, it may be impossible to retrieve the records that are stored in that area.
  • Document valuables. Take time and date stamped photos or videos of the contents of your business. These visual records can help prove the value of lost items. They may help with insurance claims or casualty loss deductions on a tax return. Businesses should also store these in a safe place.
  • Contact the IRS for help. Businesses that fall victim to a disaster may call the IRS disaster hotline at 866-562-5227 for special help with disaster-related tax issues.
  • Get copies of prior year tax records. If a business needs a copy of its tax return, it should file IRS Form 4506Request for Copy of Tax Return. The usual fee per copy is $50. However, the IRS is expected to waive this fee if a business is a victim of a federally declared disaster. For information that shows most line items from a tax return, call 1-800-908-9946 to request a free transcript. Alternatively, businesses may file IRS Form 4506T-EZShort Form Request for Individual Tax Return Transcript, or IRS Form 4506-T, Request for Transcript of Tax Return.

The IRS offers many resources to help employers plan for and recover from disasters, including IRS Publication 584-BBusiness Casualty, Disaster, and Theft Loss Workbook, and webpages devoted to preparing for a disaster and tax relief in disaster situations.

Visit our section on Planning for Workplace Emergencies for strategies to protect your employees and business from natural disasters.

 

man calculating taxes

IRS Will Not Accept Forms 1040 That Omit Health Coverage Information

IRS Issues Guidance for Taxpayers on Reporting Health Coverage

The IRS has announced that the upcoming 2018 filing season will be the first time that it will not accept electronically filed tax returns until taxpayers report their health care coverage pursuant to the individual shared responsibility provision (“individual mandate”) of the Affordable Care Act. In addition, returns filed on paper that do not address these requirements may be suspended pending the receipt of additional information, and any refunds may be delayed.

Background

The “individual mandate” (also known as individual shared responsibility) generally requires every individual to have minimum essential health coverage for each month, qualify for an exemption, or make a payment when filing his or her federal income tax return. More detailed information about the individual mandate is available in IRS Q&As.

IRS Instructions

‎To avoid refund and processing delays when filing 2017 tax returns in 2018, the IRS is instructing taxpayers to indicate on their Forms 1040, U.S. Individual Income Tax Return, whether they (and everyone on their return):

  • Had minimum essential health coverage;
  • Qualified for an exemption from the coverage requirement; or
  • Are making a payment.

Click here to read the IRS guidance in its entirety.

Our Individual Mandate section features additional information regarding the individual shared responsibility requirements.