IRS LTR227n Notice: How to Resolve ESRP Adjustments
Summary:
The IRS issues the LTR227n Notice to inform employers of proposed adjustments to their Employer Shared Responsibility Payment (ESRP). These adjustments are typically based on findings from an Appeals Conference regarding the ESRP amount owed under the Affordable Care Act (ACA). Responding to this notice is crucial to avoid further complications such as penalties, interest, or enforcement actions. Understanding the implications and knowing how to respond can help employers resolve any issues quickly and avoid unnecessary costs.
Have you received an IRS LTR227n Notice from the IRS regarding your proposed Employer Shared Responsibility Payment? This notice indicates the IRS has reviewed your ESRP liability following an Appeals Conference. It may propose a zero balance or an amount due based on discrepancies found in the initial assessment. Don’t worry; understanding what this notice means and knowing how to respond can help you navigate the process efficiently. Here’s a breakdown of what to do next.
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What is an IRS LTR227n Notice?
The IRS LTR227n Notice is an official IRS communication that notifies an employer about proposed adjustments to their ESRP under the Affordable Care Act (ACA). The ESRP is a penalty that may be assessed against employers who do not meet specific health coverage requirements for their employees. If the IRS determines changes to the ESRP after an Appeals Conference, they will issue the LTR227n Notice to inform the employer of the outcome. Being proactive in understanding the requirements can help minimize financial risks.
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Why the IRS sends an LTR227n Notice
The IRS sends this notice to inform employers of the proposed ESRP changes based on a review of their appeal. The adjustments can be due to various factors, such as:
- New information provided during the Appeals Conference that affects the original ESRP determination.
- Corrections made to reported employee coverage or employer eligibility.
- Discrepancies identified between the employer’s records and IRS data.
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.
Steps to take when you receive an IRS LTR227n Notice
When you receive an IRS LTR227n Notice, follow these steps to ensure you address the issue promptly and avoid penalties or enforcement actions:
- Review the notice thoroughly: Understand the details of the proposed ESRP adjustment and why the IRS made the changes. This helps you prepare the correct response.
- Compare with your records: Check the notice against your business’s records, especially information submitted during the Appeals Conference. Verify that the IRS used accurate data regarding employee coverage.
- Decide if you agree: If you agree with the proposed changes, follow the instructions for payment or await further instructions if the notice confirms no payment is due. If you disagree, you may still contest the proposed ESRP by providing supporting documents.
- Respond quickly: Even if you disagree, responding promptly can prevent delays, interest, or additional penalties. The IRS has specific deadlines for responses.
How to respond to an IRS LTR227n Notice
If you need to respond to the IRS LTR227n Notice, take these steps to ensure your response is processed correctly. Timely action can help resolve the matter more efficiently.
Gather your documents
Collect all relevant documentation, including your initial ESRP assessment, information provided during the Appeals Conference, and any additional records of employee coverage. Having these documents will help verify the accuracy of the IRS’s proposed adjustments. Keeping detailed records of all communication can be beneficial.
Dispute the ESRP adjustment
If you disagree with the proposed ESRP, you can contest the adjustment by submitting a written explanation. Include supporting documentation to back your claim, such as employee health insurance records or a copy of your Appeals Closing Letter (Letter 5917). Mail your response to the address provided in the notice. The IRS will review your dispute and may adjust the payment accordingly.
Make a payment
If you agree with the IRS’s adjustments and there is an amount due, you can make a payment. Send a check or money order payable to the U.S. Treasury, along with a copy of the notice, to the address listed. Alternatively, you can use the Electronic Federal Tax Payment System (EFTPS) to pay electronically. This ensures a quicker and more secure payment process.
Keep copies of your correspondence
Always retain copies of the IRS LTR227n Notice, any responses you send to the IRS, and proof of payment (if applicable). This documentation is important if there are any disputes or follow-up inquiries. It helps to have a complete record of your interactions.
Pro Tip
Keep a copy of your LTR227n Notice and any related documents. This will help if you need to dispute the ESRP or provide additional information to the IRS.
Consequences of not responding to an IRS LTR227n Notice
Failing to respond to the notice can have significant consequences. These may include:
- Delays in resolving your ESRP assessment, which could prevent you from closing your case promptly. This may cause further complications.
- Accrued interest and penalties if you owe a balance and do not make a payment by the deadline. The costs can quickly add up.
- Potential enforcement actions such as IRS liens or levies, which could complicate your business operations. Avoiding this requires timely action.
The ESRP is subject to IRS lien and levy enforcement actions, so it’s crucial to act quickly.
Pro Tip
Use the Electronic Federal Tax Payment System (EFTPS) for fast and secure ESRP payments. This method allows you to track payment history and ensures the IRS receives your payment on time.
Understanding the Employer Shared Responsibility Payment (ESRP)
The Employer Shared Responsibility Payment (ESRP) is a potential penalty for businesses that do not provide adequate health coverage. Under the Affordable Care Act (ACA), employers with 50 or more full-time employees must offer health insurance that meets specific standards. If the IRS finds that coverage is lacking, they may assess an ESRP. This can occur during an audit or after reviewing an appeal. It is important to understand how this payment is calculated to avoid unexpected penalties.
How the ESRP affects your business
An ESRP assessment can have a significant financial impact on a business. The IRS calculates the payment based on the number of full-time employees and the coverage provided. If the ESRP is not addressed, it may lead to penalties, interest, and enforcement actions. Businesses should understand their responsibilities to avoid unnecessary costs. Learn more about tax liabilities and penalties to stay compliant.
Why appealing the ESRP decision matters
Appealing the ESRP decision gives employers a chance to provide additional information or clarify discrepancies. If the IRS made errors in calculating the ESRP, the appeal process can lead to an adjustment or even cancellation of the payment.
Pro Tip
If you’re unsure how to handle the LTR227n Notice, consult with a tax professional who specializes in IRS notices. They can help you understand the notice and prepare an appropriate response.
Options if you cannot pay the ESRP
If paying the full ESRP immediately is not feasible, the IRS provides several options. These include payment plans, installment agreements, and temporary delays in collection. Understanding these options can help avoid additional penalties and interest. It is best to explore these options as soon as you receive the IRS LTR227n Notice.
Setting up a payment plan
Setting up a payment plan allows businesses to pay off the ESRP over time. The IRS offers different plans depending on the amount owed. Employers can choose from short-term agreements for smaller balances or longer-term plans for larger amounts.
Requesting a temporary delay in collection
In cases of financial hardship, businesses can request a temporary delay in collection. The IRS may pause enforcement actions if it determines that paying the ESRP would prevent the company from meeting basic expenses. This option should be considered as a last resort, and seeking advice from a tax professional can help determine the best course of action.
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Frequently asked questions
What is the employer shared responsibility payment (ESRP)?
The ESRP is a penalty that the IRS may assess against employers who do not offer affordable health coverage to their full-time employees, as required by the Affordable Care Act (ACA). It is calculated based on the coverage offered and the number of employees.
How is the ESRP amount determined?
The ESRP amount is calculated based on the number of full-time employees and whether the employer offered health insurance coverage that meets the ACA’s minimum standards for affordability and coverage. Accurate reporting is essential for avoiding unexpected penalties.
Can the IRS seize assets if the ESRP is not paid?
Yes, if the ESRP is not paid, the IRS can use enforcement actions such as liens or levies to collect the unpaid amount, including seizing bank accounts or other assets. It is crucial to address the IRS LTR227n Notice promptly.
Is it possible to set up a payment plan for the ESRP?
Yes, if unable to pay the full ESRP amount at once, payment plans or installment agreements can be arranged with the IRS to settle the balance over time. This option can help manage financial burdens effectively.
What should be done if there is a disagreement with the ESRP amount?
If you disagree with the ESRP amount, you can submit a written dispute to the IRS along with supporting documentation to contest the proposed adjustment. Follow the guidelines in the IRS LTR227n Notice for the dispute process.
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
- The IRS LTR227n Notice informs employers about proposed adjustments to their ESRP based on an Appeals Conference review.
- Employers must respond promptly to avoid penalties, interest, or enforcement actions.
- Disputing the ESRP adjustment requires providing supporting documentation and a written explanation.
- Ignoring the notice can lead to accrued interest and IRS enforcement actions, such as liens or levies.
- Payment options include mailing a check to the U.S. Treasury or using the Electronic Federal Tax Payment System (EFTPS).
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