If your business is subject to the Affordable Care Act (ACA), you may encounter IRS Letter 5699. This communication indicates that the IRS believes you have not filed required ACA information returns, specifically Forms 1094-C and 1095-C. Ignoring this notice can lead to significant penalties, so it is essential to understand its purpose and respond effectively.
IRS Letter 5699 is officially titled “Request for Employer Reporting of Offers of Health Insurance Coverage.” It serves as a formal inquiry into why your business has not submitted its ACA filings for a specific tax year. The letter provides a timeline for response and outlines the potential consequences of noncompliance. For businesses striving to maintain ACA compliance, understanding the steps to address Letter 5699 is critical.
The Purpose of IRS Letter 5699
Letter 5699 is sent to employers when the IRS suspects that required ACA filings are missing. Under the ACA, applicable large employers (ALEs) must report health coverage offers and employee insurance information annually.
The IRS uses this data to verify compliance with ACA regulations and to ensure that eligible employees have access to affordable healthcare coverage. If these forms are not filed, the IRS may issue Letter 5699 to initiate communication and determine the reasons for noncompliance.
The letter typically requests an explanation of why the forms were not filed, confirmation of whether the business is subject to ACA requirements, and a commitment to file the forms promptly if they remain outstanding. The IRS issues this notice as an initial step before imposing penalties, giving businesses a chance to correct the issue.
Why Businesses Receive Letter 5699
There are several reasons why a business might receive Letter 5699. A missed filing deadline is the most common cause, as ACA forms must be submitted annually by specified dates. If a business submits incomplete or inaccurate filings, the IRS may classify the returns as unfiled.
Additionally, a business may be misclassified as an ALE due to discrepancies in IRS or third-party data. Even minor data errors, such as mismatches in employee records or inconsistencies with other tax filings, can trigger this notice.
Understanding the root cause of the issue is essential for crafting an appropriate response. Businesses should review their ACA filing history, employee records, and any correspondence related to their reporting obligations.
How to Respond to IRS Letter 5699
Responding to Letter 5699 requires a thorough and timely approach. The first step is to carefully review the letter to understand the specific tax year and reporting requirements referenced. Businesses should confirm whether they met the ALE threshold for that year, which typically includes employing 50 or more full-time employees or full-time equivalents.
If the required forms were submitted, employers must provide documentation to verify compliance. This may include proof of electronic filing or certified mail receipts. If the forms were not filed, the response should acknowledge the oversight and outline steps to file them promptly.
Accuracy is critical when preparing and submitting Forms 1094-C and 1095-C, as further errors could lead to additional penalties.
The response must be submitted to the IRS by the deadline specified in the letter, which is typically 30 days from the date of issuance. Businesses should ensure that their response is complete and includes all necessary supporting documentation to address the IRS’s inquiry.
The Consequences of Ignoring IRS Letter 5699
Failure to respond to Letter 5699 can result in significant financial penalties under IRC Section 6721 for failing to file information returns and IRC Section 6722 for failing to provide accurate employee statements. Penalties for 2023 are $280 per form, with maximum penalties for large employers exceeding $3 million annually. Additional penalties may apply for intentional disregard, further compounding the financial risk.
Ignoring the letter also increases the likelihood of further IRS enforcement actions, including audits or additional correspondence. Businesses that fail to address the issue may face reputational damage and strained relationships with employees who rely on accurate ACA filings for tax purposes.
The Role of Proactive Compliance in Avoiding Letter 5699
Proactive compliance is the most effective way to avoid receiving IRS notices like Letter 5699. Employers should maintain accurate records of employee status, coverage offers, and hours worked throughout the year. Regular audits of internal systems and data can help identify and correct discrepancies before they escalate.
Working with a trusted ACA compliance partner like 1095EZ simplifies the reporting process and ensures that all forms are prepared and filed accurately. Leveraging a streamlined platform reduces the risk of errors and keeps your business on track with ACA requirements.
How 1095EZ Helps Businesses Navigate ACA Compliance
1095EZ offers a comprehensive solution for ACA compliance, helping businesses manage their reporting obligations with confidence. Our independent platform simplifies the preparation and filing of Forms 1094-C and 1095-C, ensuring timely and accurate submissions. In the event of receiving Letter 5699, 1095EZ provides expert guidance to help you respond effectively and avoid penalties.
With our turn-key system, businesses can handle ACA reporting efficiently, even in complex situations. From data validation to form submission, 1095EZ ensures that your compliance needs are met without adding unnecessary burdens to your internal team.
Preparing for Future ACA Reporting Cycles
Addressing Letter 5699 is an opportunity to strengthen your approach to ACA compliance. Implementing reliable data management tools and processes can help prevent future issues. Businesses should review their reporting workflows annually and stay updated on changes to ACA regulations or filing deadlines.
Training internal teams on ACA requirements and leveraging external expertise are also key to maintaining compliance. Investing in robust compliance solutions like 1095EZ ensures that your business remains prepared for future reporting cycles, reducing the likelihood of IRS notices and penalties.
The Importance of Responding Promptly to IRS Letter 5699
Responding to IRS Letter 5699 promptly is essential to mitigate potential penalties and demonstrate your commitment to compliance. The IRS provides a specific deadline, typically 30 days from the letter’s issuance, to submit your response. Missing this deadline can escalate the situation, leading to additional correspondence, audits, or automatic penalties.
Even if you are uncertain about your ACA filing status, responding on time with as much information as possible shows good faith and a willingness to cooperate. Employers who act quickly and accurately are better positioned to resolve the matter without further complications.
Addressing Data Discrepancies That Trigger Letter 5699
One common cause of receiving IRS Letter 5699 is data discrepancies between your filings and other IRS records. These discrepancies often arise from mismatches in employee Social Security numbers, errors in reporting employee hours, or inconsistencies with payroll data submitted on W-2 forms.
Reviewing your internal records to identify and correct these inconsistencies is critical. Employers should work closely with payroll providers or ACA reporting partners to ensure all data aligns with IRS expectations. Addressing discrepancies proactively can prevent further issues and strengthen your response to the IRS.
Planning Your ACA Compliance Strategy for the Next Year
Receiving IRS Letter 5699 serves as a wake-up call for many businesses to improve their ACA compliance strategies. Employers should begin planning for the next reporting cycle as soon as the current one concludes. This includes implementing systems to track employee eligibility and coverage offers throughout the year.
Regularly reviewing and updating your processes ensures that you are prepared for any regulatory changes or reporting requirements. Partnering with a compliance expert like 1095EZ provides added confidence, as their tools and guidance streamline the entire ACA reporting process, reducing the risk of errors and missed deadlines.
Contact 1095EZ for Expert Support
If your business has received IRS Letter 5699 or you want to improve your ACA compliance processes, 1095EZ is here to help. Our platform provides the tools and resources you need to file accurately and on time, giving you peace of mind and protecting your business from penalties. Get Started Today to learn more about our services and how we can support your compliance efforts.