LTR227j Notice: What It Means When the IRS Issues a Payment Demand
Summary:
The IRS LTR227j Notice informs businesses of their proposed Employer Shared Responsibility Payment (ESRP) under the Affordable Care Act (ACA). This notice typically follows discrepancies found in employer compliance with health insurance requirements for full-time employees. Prompt action is crucial to avoid penalties, interest, and enforcement actions. Understanding the notice and responding correctly can help you resolve the issue efficiently.
Receiving an IRS LTR227j Notice can be unsettling for any employer. This letter informs businesses about their proposed Employer Shared Responsibility Payment (ESRP) under the Affordable Care Act (ACA). The notice typically follows discrepancies in how an employer complied with the ACA’s requirement to provide health insurance coverage to full-time employees. While this notice may seem alarming, knowing what it means and how to respond can help you avoid penalties and resolve any misunderstandings. This article will explain the LTR227j Notice, why you might receive it, and the steps to take to address it.
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What is the LTR227j Notice?
The LTR227j Notice is an official letter from the IRS notifying employers of a proposed Employer Shared Responsibility Payment (ESRP) due to non-compliance with the ACA’s requirements for providing health insurance to full-time employees. Under the ACA, large employers (those with 50 or more full-time employees) must offer affordable health coverage that provides minimum value to at least 95% of their full-time workforce.
The notice is typically issued if the IRS determines that the employer did not offer compliant health coverage or did not offer it to the required number of full-time employees. The IRS uses information from Forms 1094-C and 1095-C, filed by employers, to identify discrepancies and calculate any ESRP that may be due.
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Why did you receive an LTR227j Notice?
- Failure to offer minimum essential coverage: The employer did not provide health insurance to at least 95% of its full-time employees.
- Coverage did not meet affordability standards: The offered health insurance was not affordable according to ACA guidelines.
- Incorrect or incomplete information: Mistakes or missing data on Forms 1094-C and 1095-C can trigger the notice.
- Employee eligibility: The IRS identified full-time employees who should have been offered coverage but were not.
Pro Tip
Review Forms 1094-C and 1095-C for accuracy before filing. Ensuring that employee information is correct and complete can help you avoid LTR227j Notices and prevent future issues with income-related discrepancies.
Steps to take when you receive an LTR227j Notice
Receiving an LTR227j Notice requires a prompt and thorough response. Here’s what to do if you get this notice:
Step 1: Review the notice carefully
The notice will provide details about the proposed ESRP, including the tax year in question and the amount due. Compare the information in the notice with your ACA compliance records and Forms 1094-C and 1095-C.
Step 2: Determine if you agree with the proposed ESRP
If you agree with the proposed ESRP, you may choose to pay the full or partial amount immediately. Payment can be made by check, money order, or electronically through the Electronic Federal Tax Payment System (EFTPS). If you disagree with the ESRP, you can dispute the notice by submitting Form 14764, ESRP Response, along with any supporting documentation that proves your compliance.
Step 3: Submit Form 14764 if you disagree
If you choose to dispute the ESRP, complete and submit Form 14764 by the response date indicated on the LTR227j Notice. Include documentation that supports your position, such as payroll records or evidence of insurance offers. Make sure your submission addresses the specific issues raised in the notice. Find more details about responding to IRS notices in our IRS Notices Guide.
Step 4: Pay the amount due, if applicable
If you agree with the proposed ESRP or your dispute is unsuccessful, the payment will be due by the deadline. Failure to pay on time can result in additional penalties, interest, or enforcement actions, such as liens or levies. The IRS may also apply your federal tax refund to the ESRP until the balance is paid in full.
Pro Tip
Set up a payment plan if you cannot pay the ESRP in full. Contact the IRS for installment agreements or other payment options to avoid further penalties and late fees.
Understanding the Employer Shared Responsibility Payment (ESRP)
The ESRP is a penalty assessed on large employers who fail to comply with the ACA’s health coverage requirements. It is calculated based on the number of full-time employees and whether the employer met the coverage thresholds for affordability and minimum essential coverage. The ESRP applies in two main situations:
Situation 1: Penalty for failing to offer minimum essential coverage
Employers who do not offer minimum essential coverage to at least 95% of full-time employees are subject to a penalty. This penalty is assessed monthly and is calculated by multiplying the total number of full-time employees (minus 30) by a specified dollar amount.
Situation 2: Penalty for offering unaffordable or inadequate coverage
Employers who provide coverage that does not meet affordability or minimum value requirements may also face an ESRP. This penalty is typically lower than the penalty for failing to offer coverage but is still significant. It is calculated based on the number of employees who received a premium tax credit for purchasing insurance through the Health Insurance Marketplace.
Consequences of not responding to the LTR227j Notice
Ignoring an LTR227j Notice can have serious financial and legal consequences. If you do not respond or make arrangements to pay the ESRP, the IRS may take the following actions:
Interest and penalties
The ESRP accrues interest from the date it is assessed until it is paid in full. Failure to pay on time can lead to additional penalties, which increase the total amount due.
IRS collection actions
The IRS may initiate collection actions, such as placing a lien on your business assets or garnishing wages. These actions can impact your business’s credit rating and financial stability.
Future tax refunds applied to the balance
If you are due a tax refund, the IRS can apply it to the ESRP until the penalty is paid in full. This means any refunds you are expecting may be delayed or reduced.
Pro Tip
Responding promptly to IRS notices can help you avoid enforcement actions. If you need more time to gather documentation, contact the IRS to request an extension and prevent potential penalties.
How to dispute an LTR227j Notice
Disputing an LTR227j Notice is possible if you believe the ESRP was assessed incorrectly. Here’s how to challenge the notice:
Step 1: Gather your documentation
Collect all relevant records that support your position, such as employee payroll records, insurance plan documents, and proof of offers of coverage. These documents will be necessary to prove compliance with the ACA requirements.
Step 2: Complete and submit Form 14764
Form 14764 allows you to formally dispute the ESRP. Make sure you provide a detailed explanation and attach copies of any documents that support your disagreement. The form must be submitted by the deadline stated on the notice. Learn more about the process in our IRS Notices Guide.
Step 3: Follow up with the IRS
After submitting your dispute, monitor your IRS account and follow up if you do not receive a response. The IRS may request additional information or clarification during the review process.
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Frequently asked questions
What is the LTR227j Notice for?
The LTR227j Notice is sent to employers who may owe an Employer Shared Responsibility Payment (ESRP) because they did not meet the Affordable Care Act (ACA) requirements for providing health coverage to full-time employees.
How is the ESRP amount calculated?
The ESRP is calculated based on the number of full-time employees, the amount of coverage provided, and whether the insurance meets ACA standards for affordability and minimum value.
What documents are needed to dispute an LTR227j Notice?
To dispute the notice, you need supporting documents such as Forms 1094-C and 1095-C, employee payroll records, proof of health insurance coverage offers, and any corrected tax forms if applicable.
Can an ESRP be waived or reduced?
An ESRP can only be reduced or waived if there is a valid reason for disputing the calculation. This may involve providing documentation that shows compliance with ACA requirements or correcting mistakes on filed forms.
How long does it take for the IRS to review a dispute?
IRS review times can vary, but it generally takes several weeks for the IRS to respond to a dispute. Employers should follow up if no response is received within 60 days.
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 LTR227j Notice informs employers of a proposed ESRP due to non-compliance with ACA requirements.
- Responding promptly and accurately can help avoid penalties, interest, and IRS collection actions.
- Disputing the notice involves submitting Form 14764 and supporting documentation.
- Failure to respond may result in enforcement actions such as liens or wage garnishments.
- Employers should ensure that Forms 1094-C and 1095-C are accurate to prevent future issues.
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