Getting a letter from the IRS is never fun. When it's a CP220J notice, it usually means your business is facing a finalized penalty under the Affordable Care Act (ACA), specifically related to employer mandate compliance under Section 4980H.
This notice typically follows a 226J letter, which outlines a proposed ACA penalty. If the IRS did not accept your explanation or you did not respond, the CP220J confirms the amount you now officially owe and adjusts your tax account accordingly.
Understanding what the CP220J means and how to respond is crucial for avoiding further complications. If ACA compliance or reporting errors triggered the issue, working with a trusted ACA reporting service can help you correct mistakes and prevent future penalties.
Common Reasons Why You Received a CP220J
The CP220J is directly tied to ACA employer mandate rules, which apply to businesses classified as Applicable Large Employers (ALEs). Under these rules, ALEs must offer affordable health coverage that meets minimum essential standards to at least 95% of their full-time employees.
If you failed to meet these criteria, or if your reporting to the IRS was incomplete, inaccurate, or missed key information, a penalty might be assessed. The IRS uses Forms 1095-C and 1094-C to evaluate compliance.
If something in those forms signals noncompliance—or if an employee received a premium tax credit through a Health Insurance Marketplace—it could trigger a 4980H penalty.
Once that penalty is proposed via Letter 226J, and you either don’t respond or the IRS doesn’t accept your response, the CP220J notice is issued to finalize the amount owed.
Common Mistakes to Avoid When Receiving a CP220J
Business owners often panic when they receive a CP220J, and understandably so. But reacting too quickly—or not at all—can make the situation worse. Here are some of the most common missteps to avoid:
Failing to read the notice in full is a big one. CP220J notices contain specific dates, amounts, and instructions, and missing even one detail can lead to further complications.
Assuming the penalty is accurate is another mistake. The IRS calculations are based on your submitted data. If your forms contained errors, omissions, or were submitted incorrectly, the penalty may not be valid. You have the right to challenge it.
Missing deadlines is a fast way to lose your opportunity to respond or appeal. The IRS includes response dates in all communications, and those timelines are rigid.
Responding emotionally or without documentation also causes problems. Any reply must be factual, well-organized, and supported by correct forms and records.
Not asking for help is one of the biggest mistakes of all. ACA compliance is complex, and a misstep in your response could result in increased penalties or prolonged issues with the IRS.
Important Steps to Respond Correctly
When you receive a CP220J notice, time is of the essence. Here’s how to respond effectively:
Start by reading the entire notice carefully. Note the penalty amount, the tax period it applies to, and any deadlines mentioned. Pay attention to whether the notice allows for further response or simply finalizes a penalty amount.
Compare the IRS records with your internal data. Review your original Forms 1094-C and 1095-C for that tax year. If any mistakes were made in your filings—such as incorrect codes, missing employees, or inaccurate offer-of-coverage information—you may be able to file corrected returns.
If you believe the penalty is in error, you may still have the option to appeal or request abatement. You’ll need to prepare a clear, professional response, often including a letter explaining your position, along with supporting documents and corrected forms if applicable.
If you agree with the penalty, follow the payment instructions provided. You can usually make payments through the IRS’s EFTPS system or by mail. Be sure to keep a copy of your payment confirmation for your records.
If you need more time or clarification, don’t hesitate to call the IRS using the contact number provided on the notice. In some cases, you may be able to request additional time to respond.
Throughout the process, document everything. Keep copies of the notice, your responses, any forms submitted, and all correspondence with the IRS.
Preventative Measures to Avoid a CP220J in the Future
No one wants to receive an IRS penalty notice. But if you do, how you respond can make a big difference in the final outcome. Here are a few tips to keep in mind:
Don’t ignore the CP220J notice. It won’t go away on its own. Even if you think the IRS made a mistake, you still need to respond according to their instructions and timelines.
Keep your ACA records organized and up to date. If you're subject to the employer mandate, make it a habit to store copies of your 1095-C and 1094-C forms, proof of health coverage offers, and communications with employees. Accurate records are your best defense if a penalty is ever issued.
Use a reliable ACA reporting service. A trusted partner like 1095EZ Online helps you avoid filing mistakes and catch errors before they become penalties.
Review your ALE status regularly. Businesses that hover near the 50-employee threshold may change from year to year. Always reassess your headcount and full-time equivalent calculations to make sure you're in compliance.
Educate your HR or payroll team. Understanding the employer shared responsibility provisions and the filing requirements of Forms 1094-C and 1095-C is essential for anyone involved in ACA reporting.
How ACA Penalties Are Calculated Under Section 4980H
Understanding how the IRS arrives at your penalty amount can help you assess whether the CP220J notice is accurate. Penalties under Section 4980H come in two forms: 4980H(a) and 4980H(b).
4980H(a) applies if you failed to offer coverage to at least 95% of your full-time employees. The penalty is calculated based on your total number of full-time employees, minus the first 30. In 2025, this penalty is approximately $2,970 per employee annually.
4980H(b) applies when coverage is offered, but it’s either unaffordable or doesn’t meet minimum value standards. This penalty is smaller and only applies to the number of employees who received a premium tax credit on the Marketplace. For 2025, the annual penalty is around $4,460 per affected employee.
The CP220J notice should clearly state which type of penalty is being applied and the corresponding figures. If these numbers don’t align with your business records or your ACA reporting, it’s worth reviewing with a compliance expert.
When to Seek Professional ACA Compliance Help
ACA reporting and penalty notices are filled with codes, fine print, and confusing references. For most business owners, especially those running small to mid-sized companies, figuring it all out alone is more than just stressful—it’s risky.
If you’ve already received a CP220J notice, it’s likely the result of a breakdown in reporting, record-keeping, or coverage strategy. These problems don’t always resolve themselves next year. That’s why bringing in ACA compliance help, like the team at 1095EZ Online, can be a smart move.
They specialize in correcting past errors, responding to IRS communications, and setting you up with a system that prevents future penalties. The cost of professional help is almost always less than the penalties you risk by going it alone.
What to Do If You Disagree With the CP220J Penalty
If you don’t believe the penalty is accurate, you still have options. Depending on your situation, you may be able to request an abatement or appeal the IRS’s determination.
Start by gathering documentation that supports your case. This might include payroll records, health insurance offer details, and previously submitted 1094-C and 1095-C forms. In some cases, even something as small as a coding error on a 1095-C can lead to a wrongful penalty.
You should then prepare a written response that outlines your position and references specific parts of the ACA and IRS guidelines. This isn’t always simple, which is why many businesses choose to work with a specialist who understands both the technical and procedural side of ACA compliance.
The IRS does allow corrections, and if your response is clear and submitted on time, it could reduce or eliminate your penalty.
Turn CP220J Confusion into ACA Compliance Clarity
If the CP220J notice has you worried, 1095EZ Online is your trusted partner in ACA compliance. Our platform is built specifically to help businesses like yours navigate the complexities of Forms 1094-C and 1095-C with confidence and ease.
Whether the IRS penalty was triggered by a missed filing, a coding error, or a misunderstanding of ALE requirements, 1095EZ Online can help you:
Review and correct past ACA filings
Identify and fix reporting errors before they become costly
Submit compliant forms directly to the IRS
Generate employee copies automatically
Stay ahead of future reporting deadlines with built-in alerts and validations
Even better, our system works with your existing payroll and HR data-no need for a system overhaul. From one-time corrections to year-round support, we offer scalable solutions for any employer managing ACA obligations.
Don't Let a CP220J Notice Disrupt Your Business
The CP220J notice might feel like the end of the road, but it's really just the beginning of a fixable situation-if you take the right steps.
Instead of stressing over forms, deadlines, and penalties, let 1095EZ Online take the complexity off your plate. Our team understands how to resolve ACA compliance issues quickly and professionally, giving you the freedom to focus on running your business.
Act now. Responding promptly can reduce or even eliminate your penalty. Get started today and take control of your ACA compliance with confidence.