IRS LTR227L Notice: How to Resolve Your ESRP Recalculations
Summary:
The IRS sends Letter 227-L (LTR227L) to inform employers about changes to their proposed Employer Shared Responsibility Payment (ESRP) under Section 4980H of the Internal Revenue Code. This letter follows an earlier notice about the ESRP calculation and includes an updated ESRP Summary Table, reflecting new information provided by the employer. Employers must review the letter, decide if they agree with the revised ESRP, and respond by the deadline to avoid penalties or enforcement actions.
Have you recently received an IRS LTR227L notice about your Employer Shared Responsibility Payment (ESRP)? Don’t worry. This notice means that the IRS adjusted the ESRP amount based on the information you submitted in response to an earlier correspondence. It includes an updated ESRP Summary Table, details for the affected months, and an explanation of the changes. Understanding the notice and taking the right steps can help you manage your tax obligations and prevent further issues. Let’s explore what the LTR227L notice means and what actions you should take to protect your business.
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What is IRS Letter 227-L (LTR227L)?
IRS Letter 227-L is a notification that informs employers about changes to the proposed ESRP under Section 4980H of the Internal Revenue Code. The ESRP is part of the Affordable Care Act (ACA), which requires large employers to offer adequate health coverage to full-time workers. If employers don’t meet these requirements, the IRS may impose penalties. The LTR227L letter explains the revised ESRP calculation after considering your response to an earlier notice. It also details any changes made to the original assessment.
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Reasons for receiving an LTR227L notice
The IRS may send Letter 227-L for several reasons:
- Your response to a previous ESRP notice included new information, such as updated employee data or corrected coverage details, which affected the calculation.
- The original ESRP assessment was revised because of changes to employee data, possibly due to payroll updates or adjustments in employee status.
- The number of full-time employees eligible for health coverage changed during the reporting period, which influenced the ESRP calculation.
- New information affected the penalty calculation, leading to changes in the amount you owe.
Receiving an LTR227L notice does not always mean there was an error. It indicates that the information you provided led to a review and adjustment.
Pro Tip
Set up IRS account alerts online to get real-time notifications on any changes to your tax return or account. This helps you stay updated on adjustments and due dates.
Understanding the ESRP and its implications
The ESRP is a penalty that applies to employers who do not comply with the health coverage requirements of the Affordable Care Act. It affects companies with 50 or more full-time employees that fail to offer affordable and adequate health insurance. Under the ACA, employers need to provide coverage that meets minimum value standards and is affordable for employees. If these standards are not met, the employer may face a financial penalty. This penalty is calculated based on the company size and the coverage gaps.
How the ESRP is calculated
The IRS uses several factors to calculate the ESRP, including:
- The number of full-time employees, minus the first 30 who are excluded from the ESRP calculation.
- The months when health coverage was insufficient, unaffordable, or not provided at all.
- Whether at least one full-time employee received a Premium Tax Credit (PTC) to buy health coverage through a marketplace because the employer’s insurance did not meet the required standards.
The ESRP Summary Table in the LTR227L letter gives a detailed monthly breakdown of the proposed payment. This table is essential for reviewing the penalty, and comparing it with your records helps ensure accuracy.
Common scenarios triggering an ESRP
Employers might face an ESRP for several reasons:
- Not offering health insurance coverage to at least 95% of full-time employees during the tax year.
- Providing health insurance that does not meet the minimum value standard, meaning the plan covers less than 60% of the total allowed cost of benefits.
- Offering a plan that is considered unaffordable based on employee income, leading some employees to qualify for Premium Tax Credits.
- Having full-time employees who received a Premium Tax Credit for coverage through a marketplace, showing that the employer’s insurance did not meet ACA requirements.
Understanding these scenarios helps employers take proactive steps to comply with ACA requirements and avoid potential penalties.
Pro Tip
Keep detailed records of your employee health coverage data and any correspondence with the IRS. This documentation will be useful for verifying ESRP calculations or filing an appeal if needed. Supporting documents like bank statements can help verify payment records.
What to do if you receive a Letter 227-L (LTR227L notice)
Receiving an LTR227L notice requires immediate attention to avoid potential penalties, liens, or levies. Follow these steps to handle the notice appropriately:
Step 1: Review the letter carefully
Examine the LTR227L notice thoroughly. The letter outlines the revised ESRP amount, provides an ESRP Summary Table, and includes Form 14765, the Employee Premium Tax Credit (PTC) Listing, which identifies full-time employees eligible for PTC. Compare the updated information with your previous records and any prior correspondence. It’s essential to understand the reasons for the adjustment and ensure that the data used by the IRS aligns with your records.
Step 2: Decide whether to agree or disagree with the proposed ESRP on your LTR227L notice
Based on your review, determine if you agree with the revised ESRP amount:
- If you agree: Complete, sign, and date the enclosed Form 14764, ESRP Response. Return it to the IRS by the response date shown in the letter, along with the payment, if any. You may use the Electronic Federal Tax Payment System (EFTPS) to make payments easily.
- If you disagree: You have the option to request a meeting or a telephone conference with the IRS supervisor listed on the letter. Alternatively, you can file an appeal through a small case request or a formal protest, depending on the ESRP amount in dispute. Providing detailed explanations and supporting documents will strengthen your case during the appeal process.
Step 3: File an appeal if necessary
If you disagree with the revised ESRP amount, you can request an appeal:
- Small case request: If the total disputed ESRP is $25,000 or less, you can send a letter requesting consideration by the IRS Appeals Office. Include reasons for your disagreement, and provide any relevant documentation to support your case.
- Formal protest: For disputes over $25,000, file a formal written protest as described in the included Publication 5, Your Appeal Rights and How to Prepare a Protest If You Don’t Agree. This formal protest should clearly explain the reasons for your disagreement and include supporting documents.
The appeals process can help you avoid incorrect penalties, so take advantage of this option if you have grounds for a dispute.
Pro Tip
Use the Electronic Federal Tax Payment System (EFTPS) to schedule ESRP payments. This platform allows you to track payments and ensures timely processing, avoiding late fees.
Potential consequences of not responding to LTR227L notice
Failing to respond to an IRS LTR227L notice can result in significant penalties:
IRS lien and levy actions
If you do not pay the proposed ESRP or arrange a payment plan, the IRS may take enforcement actions, including filing liens or levying assets. These measures can seriously impact your business’s finances and credit standing.
Interest accrual and additional penalties
Unpaid ESRP amounts will accrue interest from the date of the notice. Penalties may also be applied for non-compliance with the payment terms outlined in the letter. This can increase the total amount owed over time, so addressing the notice promptly is crucial.
Delays in resolving tax disputes
Ignoring the notice can delay the resolution of your tax situation. The IRS will continue to pursue collection efforts until the ESRP is paid in full. Additionally, delaying your response may limit your ability to dispute the charges effectively, as you could miss critical deadlines for appeals.
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Frequently asked questions
What should you do if you miss the response deadline on your LTR227L notice?
If the response deadline has passed, it’s still important to contact the IRS as soon as possible. Explain your situation and inquire about possible next steps. Delays may result in penalties and interest, but reaching out promptly may help minimize these consequences.
Can the ESRP be reduced or waived?
The ESRP may be adjusted if errors are found in the initial calculation or if additional information justifies a reduction. Waivers, however, are uncommon and generally require specific circumstances such as reasonable cause or hardship.
Will paying the ESRP affect future tax refunds?
Yes, unpaid ESRP balances can affect future tax refunds. The IRS may apply any tax refund you are due toward the outstanding ESRP amount until the balance is fully settled.
How can the Taxpayer Advocate Service help?
The Taxpayer Advocate Service (TAS) can help if the ESRP creates a significant financial hardship or if you encounter difficulties resolving the issue with the IRS. TAS is an independent organization within the IRS that provides free assistance.
Can you resolve the ESRP issue on your LTR227L notice online?
Some steps can be taken online, such as using the Electronic Federal Tax Payment System (EFTPS) to make payments. However, for appeals or protests, written correspondence is usually required, following the instructions in the notice.
Need help understanding other IRS letters and notices? Visit our comprehensive guide to IRS Letters and Notices or search for the document you received in the table below.
| CP01 | The IRS verified your claim of identity theft and will monitor your account. |
| CP01H | The IRS received a tax return with a social security number that belongs to a dead person. |
| CP02H | Money is due on an amended return based on a grant received due to Hurricane Katrina, Rita, or Wilma. |
| CP03C | You received the First-Time Homebuyer Credit for a house you purchased. |
| CP04 | You may be eligible for tax deferment because either you or a spouse served in a combat zone, a qualified contingency operation, or a hazardous duty station during the tax year specified on your notice. |
| CP08 | You may be entitled to additional money due to the Additional Child Tax Credit. |
| CP10 | Your tax return changed due to a miscalculation, and the refund you wanted to apply to an estimated tax payment has changed. |
| CP10A | Your tax return changed due to a miscalculation of the Earned Income Credit, and the refund you wanted to apply to an estimated tax payment has changed. |
| CP11 | You owe money because the IRS amended your return due to a miscalculation. |
| CP11A | Your tax return changed due to a miscalculation of the Earned Income Credit, and the refund you wanted to apply to an estimated tax payment also changed. |
| CP11M | Your tax return changed due to a miscalculation of the Making Work Pay and Government Retiree Credit, and the refund you wanted to apply to an estimated tax payment has changed. |
| CP12 | You are due a bigger refund because the IRS corrected one or more mistakes on your tax return. |
| CP12A | The IRS made changes to correct the Earned Income Credit (EIC) claimed on your tax return. |
| CP12E or CP12F | The IRS corrected a miscalculation on your return. |
| CP12M | The IRS made changes to the computation of the Making Work Pay and/or Government Retiree Credits on your return. |
| CP12R | The IRS made changes to the computation of the Rebate Recovery Credit on your return. |
| CP13 | The IRS made changes to your return due to a miscalculation. There is no refund or amount due. Your balance is zero. |
| CP13A | The IRS made changes to your return due to a miscalculation of the Earned Income Credit. There is no refund or amount due. Your balance is zero. |
| CP13M | The IRS made changes to your return due to a miscalculation of the Making Work Pay credit or the Government Retiree Credit. There is no refund or amount due. Your balance is zero. |
| CP13R | The IRS made changes to your return due to a miscalculation of the Recovery Rebate Credit. There is no refund or amount due. Your balance is zero. |
| CP14 | You owe money on unpaid taxes. |
| CP16 | The IRS made changes to your return due to a miscalculation. The refund you were due was applied to other tax debts. |
| CP21A | You owe money due to the changes you requested that the IRS make on your tax returns. |
| CP21B | You are due a refund due to the changes you requested that the IRS make on your tax returns. The money should arrive within 2 to 3 weeks. |
| CP21C | The IRS made the requested changes to your tax return. You will not receive a refund, and there is no tax due. Your balance is zero. |
| CP21E | As a result of your recent audit, the IRS made changes to your tax return, and you owe money as a result of those changes. |
| CP21I | The IRS made changes to your tax return relating to the Individual Retirement Arrangement (IRA) taxes. You owe money due to the changes. |
| CP22A | The IRS made the changes you requested, and you owe money as a result. |
| CP22E | As a result of your recent audit, the IRS changed your tax return, and you now owe money. |
| CP22I | The IRS made changes to your tax return relating to the Individual Retirement Arrangement (IRA) taxes. You owe money due to the changes. |
| CP23 | The IRS changed your return because there was a difference between the amount of estimated tax payments listed on your tax return and the amount actually posted to your account. You owe taxes due to these changes. |
| CP24 | The IRS changed your return because there was a difference between the amount of estimated tax payments listed on your tax return and the amount actually posted to your account. This resulted in an overpayment of estimated taxes. |
| CP24E | The IRS changed your return because there was a difference between the amount of estimated tax payments listed on your tax return and the amount actually posted to your account. This resulted in an overpayment of estimated taxes. |
| CP25 | The IRS changed your return because there was a difference between the amount of estimated tax payments listed on your tax return and the amount actually posted to your account. You are not due a refund, nor do you owe any money. Your balance is zero. |
| CP31 | You need to update your address because your refund check was returned to the IRS. |
| CP45 | The IRS was unable to apply your overpayment to your estimated tax as you requested. |
| CP49 | The IRS used all or part of your refund to pay a tax debt. |
| CP53 | Your refund check will be sent by mail because the IRS can’t provide your refund through direct deposit. |
| CP57 | The bank declined your payment, so the IRS was unable to draft funds from your bank account. |
| CP71 | A reminder of the amount you owe in tax, penalty, and interest. |
| CP71A | A reminder of the amount you owe in tax, penalty, and interest. |
| CP71C | A reminder of the amount you owe in tax, penalty, and interest. |
| CP71D | A reminder of the amount you owe in tax, penalty, and interest. |
| CP88 | The IRS is holding your refund because you haven't filed one or more tax returns, and it believes you will owe tax. |
| CP90 | The IRS is notifying you of its intent to levy certain assets for unpaid taxes. You have the right to dispute the levy in a Collection Due Process hearing. |
| CP91 | The IRS will levy up to 15% of your social security benefits for unpaid taxes. |
| CP120 | The IRS needs documentation of your tax-exempt status. |
| CP120A | Your organization’s tax-exempt status has been revoked because it failed to file a Form 990 series return for three consecutive years. |
| CP130 | You may no longer need to pay the Alternative Minimum Tax (AMT) because your tax return filing requirements changed. |
| CP152 | The IRS received your return. |
| CP153 | The IRS will send your refund by mail because your direct deposit did not go through. |
| CP161 | You have an unpaid balance due to the IRS. |
| CP166 | Your monthly payment to the IRS did not go through due to insufficient funds in your bank account. |
| CP178 | You may no longer owe excise tax because your tax return filing requirements changed. |
| CP231 | You need to update your address because your refund was returned to the IRS. |
| CP259 | You did not file the business tax return identified in the notice. |
| CP259A | You should have filed these forms but did not – Form 990/990-EZ, Return of Organization Exempt From Income Tax, or Form 990-N (e-Postcard). |
| CP259B | The IRS requires you to file these forms but did not – Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation. |
| CP259C | The IRS believes that you are a private foundation, but did not file the required Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation. |
| CP259D | You must file this form, but you did not – Form 990-T, Exempt Organization Business Income Tax Return. |
| CP259E | You should have filed this form, but you did not – Form 990-N (e-Postcard) or Form 990/990-EZ, Return of Organization Exempt From Income Tax. |
| CP259F | The IRS requires you to file this form but did not – Form 5227, Split-Interest Trust Information Return. |
| CP259G | The IRS requires you to file this form, but you didn’t – Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations. |
| CP259H | As a tax-exempt political organization, you must file this form, but you did not – Form 990/990-EZ, Return of Organization Exempt From Income Tax. |
| CP276A | You submitted your tax liability schedule incorrectly. The IRS typically charges a Federal Tax Deposit (FTD) penalty for this but did not this time. |
| CP276B | The IRS did not receive the correct amount of tax deposits. It normally charges a Federal Tax Deposit (FTD) penalty but did not this time. |
| CP297 | The IRS is notifying you of its intent to levy certain assets for unpaid taxes. You have the right to dispute the levy at a Collection Due Process hearing. |
| CP297A | The IRS has levied your assets for unpaid taxes. You have the right to dispute the levy at a Collection Due Process hearing. |
| CP298 | The IRS notifying you of its intent to levy up to 15% of your social security benefits for unpaid taxes. |
| CP501 | You have a balance due on one of your tax accounts. |
| CP503 | You have an unpaid balance on one of your accounts, and the IRS has not heard from you. |
| CP504 | You have an unpaid amount due on your account. If you do not pay immediately, the IRS will levy your state income tax refund to apply it to the amount you owe. |
| CP504B | You have an unpaid amount due on your account. If you do not pay immediately, the IRS will levy certain property or rights to property to apply it to the amount you owe. |
| CP521 | A reminder that you have an installment agreement payment due. |
| CP523 | You have defaulted on your payment agreement. Therefore the IRS is terminating the agreement and will levy your assets. |
| CP601 | Usted tiene un saldo pendiente de pago (dinero que le debe al IRS) en una de sus cuentas contributivas. |
| CP603 | No hemos recibido respuesta de parte de usted y todavía tiene un saldo sin pagar en una de sus cuentas contributivas. |
| CP604 | Usted tiene un saldo sin pagar en su cuenta. De no pagar esta cantidad inmediatemente, el IRS embargará cualquier reembolso de impuestos estatales al que tenga derecho y aplicarlo al pago de su deuda. |
| CP604B | Usted tiene un saldo sin pagar en su cuenta. De no pagar esta cantidad inmediatemente, el IRS embargará ciertas propiedades o derechos de propiedad y lo aplicará al pago de su deuda. |
| CP621 | Este aviso es para notificarle que usted tiene un plan de pagos a plazos vencido. Por favor, envíe el pago inmediatamente. |
| CP623 | Este aviso es para informarle nuestra intención de cancelar su plan de pagos a plazos y confiscar (embargar) sus bienes. Usted incumplió en su acuerdo. |
| CP711 | Nosotros realizamos cambios a su planilla debido a que entendemos que hubo un cálculo erróneo. Como resultado de estos cambios, usted adeuda dinero por sus contribuciones. |
| CP721 | Hicimos el(los) cambio(s) que usted solicitó a su declaración de impuestos para el año tributario que aparece en su aviso. Como resultado de éste(estos) cambio(s) usted debe dinero en sus impuestos. |
| CP722 | Hicimos el(los) cambio(s) que usted solicitó a su declaración de impuestos para el año tributario que aparece en su aviso. Como resultado de éste(estos) cambio(s) usted debe dinero en sus impuestos. |
| CP771 | Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses. |
| CP772 | Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses. |
| CP773 | Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses. |
| CP774 | Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses. |
| CP959 | Usted no radicó su planilla de contribución de negocios identificada en este aviso. |
| CP2000 | The income or payment information on file doesn’t match your tax return. The discrepancy may result in an increase or decrease in your tax due. |
| CP3219A | The IRS has received information that is different from what you reported on your tax return. This may result in an increase or decrease in your tax. |
| CP3219N | The IRS didn’t receive your tax return, so it calculated your return based on the information received from employers, financial institutions, and others. If you want to challenge the proposed tax, you have 90 days from the date of this notice. If you are outside the country, you have 150 days. |
| Letter 0012C | The IRS needs additional information to process your tax return. |
| Letter 0484C | The IRS wants a completed |
| Letter 0525 | Updates you on proposed changes after an IRS examination. Any changes are explained and details the refund due or taxes owed. |
| Letter 531 | IRS Notice of Deficiency. The information the IRS received about you was different from what you reported on your return. |
| Letter 0668D(LP 68) | The IRS released their levy. |
| Letter 0549C | Your tax bill was paid. |
| Letter 0681C | The IRS accepted your payment proposal. However, this is not a formal Installment Agreement. |
| Letter 0757C | You did not adhere to the terms of your Installment Agreement. |
| Letter LT 11 | The IRS plans to seize your property or rights to property. |
| Letter 1058 | The IRS has not received your payment. It plans to seize your property or rights to property. |
| Letter 1615 (LT 18) | You must respond to the IRS within 10 days of this notice regarding past due tax returns. |
| Letter 1737 (LT 27) | Complete and sign Form 433F, Collection Information Statement. |
| Letter 1961C | Your application for a Direct Debit Installment Agreement was declined. It explains why and what you need to do to qualify. |
| Letter 1962C | Your application for a |
| Letter 2050 (LT 16) | The IRS is trying to collect unpaid taxes from you from returns that have been filed or from returns that have not been filed. |
| Letter 2257C | The IRS is providing the payoff amount that you requested. |
| Letter 226-J | An IRS letter to large employers notifying them that they may be liable for an Employer Shared Responsibility Payment (ESRP). |
| Letter 2271C | A request for an Installment Agreement has been approved. It explains the fees and how to qualify for a Low Income Fee Reduction. The letter may also request missing information. |
| Letter 2272C | An IRS letter explaining why your request to pay the balance due in installments was declined. |
| Letter 2273C | A confirmation letter of your request to pay the balance due in installments. It contained the amount to pay, fees charged, and where to send payment. Instructions on how to apply for the Low Income Fee Reduction included. |
| Letter 2318C | A response to a request to pay taxes due to payroll deductions. It also explains the fees that are charged. |
| Letter 2357C | The IRS is admitting that it did not send you the balance due notices that it should have. |
| Letter 2603C | The IRS accepted your installment agreement. The IRS will file a Notice of Federal Tax Lien on your personal property. |
| Letter 2604C | The IRS has accepted your request for installment payments. This IRS letter provides the monthly payment, the address where to send it, and the fees charged. The letter also provides instructions on how to apply for the Low Income Fee Reduction. |
| Letter 2761C | The IRS is requesting your combat zone service dates to ensure that it provides you with the special provisions and protection of the combat zone deferment. Copies of military orders or other documentation to support your time served may be requested. Civilians working in support of the Armed Forces may be required to provide a Letter of Authorization or a letter from their employer. |
| Letter 2789C | An annual reminder notice, as required by law, of the balance due to the IRS. It explains that penalties and interest continue to accrue until the balance is fully paid. |
| Letter 2840C | Confirms your Installment Agreement request and includes the payment amount and due date. This IRS letter explains the fees charged for paying monthly and explains how to apply for the Low Income Fee Reduction (if you qualify). |
| Letter 3030C | Provides an explanation of the tax, penalty, and interest still due on your account. |
| Letter 3127C | A confirmation of your request to make a change to your Installment Agreement. This IRS letter explains the fees for the change. Changes can be to the payment amount or due date, or it can include additional liabilities. |
| Letter 3174 | A reminder of taxes due after the IRS has sent a Notice of Intent to Levy. |
| Letter 3217C | The IRS has accepted your request to pay the balance in installments. This IRS letter provides your payment amount, the due date, and fees charged. The letter also provides instructions on applying for the Low Income Fee Reduction (if you qualify). |
| Letter 3228 (LT 39) | A request to pay the balance due within 10 days using the envelope provided. |
| Letter 3500 | The IRS has received your documents, and it needs additional time to review them. |
| Letter 3572 | Your Federal Income Tax Return has been selected for examination. The IRS auditor requests that you call to schedule an audit appointment. |
| Letter 4883C | The IRS received your federal income tax return but needs more information to verify your identity in order to process your tax return accurately. |
| Letter 4903 (LT 26) | You must file your tax returns immediately. The IRS has previously contacted you, but it did not receive a response. |
| Letter LP 47 | The IRS is trying to locate the person identified in the letter and is requesting that you provide their new address. |
| Letter LP 59 | The IRS has not received a response to the notice of levy it previously sent. |
| Audit Letter 2205 | The IRS manages audits either by mail or through an in-person interview to review your records. The interview may be at an IRS office (office audit) or the taxpayer’s home, place of business, or accountant’s office (field audit). |
| Letter 915 | You recently underwent an audit, and the IRS informs you that you now owe taxes. |
Key takeaways
- IRS Letter 227-L notifies employers of adjustments to the proposed Employer Shared Responsibility Payment (ESRP).
- The ESRP is calculated based on full-time employees’ eligibility for health coverage and Premium Tax Credits.
- Employers must respond to the notice by the specified date to agree or appeal the ESRP adjustments.
- Failing to respond can result in IRS enforcement actions such as liens, levies, and interest accruals.
- Appeals can be filed through a small case request or formal protest, depending on the ESRP amount.
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