Navigating IRS Notices: What to Do if You Receive a CP220J Form
For businesses, navigating the requirements of the Affordable Care Act (ACA) can be complex, and the consequences of non-compliance can be significant. One particularly challenging IRS notice that businesses may encounter is the CP220J form. This notice relates to the ACA employer mandate, signaling potential issues with health coverage obligations for employees.
In this guide, we’ll explain the details of the CP220J form, outline the steps to take if you receive one, and discuss how 1095 EZ Online can provide expert support to help you stay ACA-compliant.
What is a CP220J Form?
The CP220J is an IRS notice informing businesses of a penalty due to non-compliance with the ACA employer mandate. Under the ACA, applicable large employers (ALEs)—those with 50 or more full-time employees—are required to offer affordable health insurance that meets minimum essential coverage standards. When a business fails to meet these requirements, the IRS may assess a penalty under Section 4980H, triggering a CP220J notice.
A CP220J form can indicate one of two primary compliance issues:
Failure to offer health coverage: This is also known as the 4980H(a) penalty. It applies when an ALE fails to offer minimum essential coverage to at least 95% of its full-time employees (and their dependents). Inadequate coverage: Known as the 4980H(b) penalty, this applies when the health coverage offered does not meet ACA affordability standards or does not provide minimum value. The IRS assesses this penalty per employee who enrolls in coverage through the ACA Marketplace and qualifies for a premium tax credit.
The CP220J notice will specify the amount due and outline adjustments made to your account based on your ACA filings. Since this penalty can be substantial, addressing the CP220J promptly and correctly is critical. Ignoring the notice or missing the response deadline can lead to further penalties and interest charges, compounding the financial impact on your business.
4 Steps to Take if You Receive a CP220J Form
Receiving a CP220J form may feel overwhelming, but taking proactive steps can help you manage the situation effectively. Here’s a detailed guide to what you should do:
Review the Notice Carefully
Start by reading through the entire CP220J notice to understand the specific details of the penalty. Pay attention to the following:
Penalty amount: Confirm the penalty amount specified in the notice, as it will help you understand the scale of the issue. Explanation of adjustments: The CP220J will include an explanation of the adjustments the IRS made based on your ACA compliance status. Response deadline: Note the due date for responding to the notice. Missing this deadline can result in additional penalties and could complicate your ability to dispute the charges.
Taking the time to understand the notice thoroughly will ensure that you respond accurately and prevent further complications.
Verify Your ACA Compliance Records
Next, gather all relevant documentation related to your ACA compliance for the period in question. Key documents to collect include:
Form 1094-C and 1095-C filings: These forms provide detailed information on your health coverage offerings and the status of your employees. Verify that these filings are accurate and reflect the correct information about employee coverage. Employee records: Ensure you have documentation of the health coverage options offered to each full-time employee during the tax year specified in the CP220J notice. Payroll records: Review payroll records to confirm that the coverage offered met ACA affordability standards for each employee, based on their income and the lowest-cost health plan available.
By cross-referencing these documents, you can identify any discrepancies or errors in your original filings that may have led to the penalty assessment. This step is crucial for determining whether the penalty is accurate and if there are grounds for disputing it.
Consult with an ACA Compliance Specialist
Understanding ACA requirements and responding to IRS notices like the CP220J often requires specialized expertise. Engaging an ACA compliance specialist can help you navigate the complexities of the notice and determine your best course of action. Here’s how a specialist can assist:
Evaluate the accuracy of the IRS’s calculations: ACA compliance specialists are well-versed in the intricacies of ACA regulations. They can assess whether the IRS’s penalty assessment aligns with your actual compliance status. Determine if adjustments to your filings could reduce or eliminate the penalty: If errors are identified, an ACA specialist can recommend adjustments to your filings that may lower the penalty amount or help you avoid it entirely. Develop a compliance plan to prevent future notices: An ACA consultant can review your processes and recommend best practices to maintain compliance moving forward.
Partnering with a professional ACA compliance consultant can save your business time, reduce the risk of penalties, and ensure that your response to the CP220J notice is comprehensive and accurate.
Respond to the IRS by the Deadline
It’s essential to respond to the CP220J notice by the deadline specified, even if you need additional time. You may be able to request an extension, but this must be initiated promptly. Your response to the IRS should include:
Supporting documentation: Attach any relevant records or documentation that support your case or explain discrepancies. An explanation of your position: Clearly outline any reasons why you believe the penalty assessment may be inaccurate. If there were genuine errors in your filing, explain how they occurred and what steps you’re taking to address them. Proposed payment arrangements: If you are unable to pay the penalty in full, consider proposing a payment arrangement. The IRS may be able to set up a structured payment plan.
Responding within the specified timeframe is vital. A well-documented response can increase your chances of a favorable outcome and minimize additional penalties.
How 1095 EZ Online Can Help with ACA Compliance
Receiving a CP220J form can be overwhelming, especially for businesses unfamiliar with ACA complexities. 1095 EZ Online specializes in ACA consulting services, providing expert guidance to help businesses address IRS notices like the CP220J efficiently. Here’s how 1095 EZ Online can support you:
Penalty Assessment Review: Our ACA specialists will carefully review your CP220J notice and examine your ACA filings to confirm whether the IRS’s penalty assessment is accurate. If there are discrepancies, we’ll guide you on the appropriate steps to dispute or address them. Filing Adjustments and Corrections: In cases where adjustments to your filings are necessary, 1095 EZ Online can assist with revising Form 1094-C and 1095-C submissions, ensuring that your records are updated accurately to reduce or eliminate penalties. Ongoing Compliance Support: Beyond addressing the immediate penalty, 1095 EZ Online provides ongoing ACA compliance consulting, helping you implement best practices to avoid future IRS notices. Our team keeps you updated on regulatory changes and helps ensure that your ACA filings are accurate year after year.
With 1095 EZ Online as your ACA compliance partner, you gain the support of professionals who understand the intricacies of IRS notices, helping you navigate CP220J penalties effectively and reduce the impact on your business.
Final Thoughts: Addressing a CP220J Form with Confidence
The CP220J notice can be an unsettling experience for any business, signaling potential penalties that can strain financial resources and create administrative challenges. However, with a clear understanding of the CP220J form, strategic steps, and professional guidance, you can navigate this IRS notice effectively.
Taking the time to understand the details of the CP220J notice, verifying your ACA records, and consulting with an ACA compliance specialist can make a significant difference in the outcome. 1095 EZ Online offers comprehensive support for businesses facing CP220J notices, ensuring that you have the resources and expertise needed to address compliance issues and protect your business from further penalties.