The IRS is issuing ACA penalty notices for both the 2024 and 2025 tax years right now. If your organization receives one, it will not necessarily be a Letter 226J. The IRS sends several different ACA penalty letters, and each one means something different.
This blog breaks down the letters employers are most likely to receive right now, what triggers each one, and what to do next.
What Triggers an IRS ACA Penalty Notice?
The IRS enforces the ACA’s Employer Mandate by cross-referencing your Form 1094-C and 1095-C filings against individual tax returns. If a full-time employee received a Premium Tax Credit (PTC), the system checks your filing for a matching coverage gap or coding error. A match triggers an automatic flag.
This is largely a data-matching process, not a manual audit. That’s why small filing errors can trigger large proposed penalties.
What Is IRS Letter 226J?
Letter 226J is the most common ACA penalty notice. It proposes an Employer Shared Responsibility Payment (ESRP) under one of two penalty types:
- The 4980H(a) penalty applies if you failed to offer Minimum Essential Coverage to at least 95% of your full-time workforce. For the 2024 tax year, this penalty is $2,970 per employee, applied across your full-time headcount minus a 30-employee exemption.
- The 4980H(b) penalty applies if you offered coverage that was unaffordable or didn’t meet minimum value. It only applies to employees who received a PTC. For 2024, this penalty is $4,460 per affected employee.
Letter 226J is not a bill. It is a proposed assessment, and you have 90 days to respond under the Employer Reporting Improvement Act. In many cases, these penalties stem from coding errors on Form 1095-C rather than an actual coverage failure.
What Is IRS Letter 5699?
Letter 5699 is sent when the IRS believes you were an Applicable Large Employer (ALE) for a given tax year. The IRS has no record of your 1094-C or 1095-C filings. It is not a penalty. It is a request to confirm your filing status, and you have 30 days to respond.
The IRS often bases its ALE assumption on your total W-2 count, which can overstate your actual full-time headcount if you employ variable-hour, part-time, or seasonal workers. If you ignore Letter 5699, the IRS treats your silence as confirmation of non-filing.
The next step is often Letter 5005-A, a proposed penalty under IRC §6721 and §6722 for failing to file or furnish your ACA forms, followed by CP215, which confirms the assessment and demands payment.
Many employers come to Trusaic with a Letter 5005-A or CP215, insisting they never received a Letter 5699. Either way, the response clock is already running, so it’s worth checking your records.
What Is IRS Letter 972CG?
Letter 972CG addresses a different issue than 226J or 5699. It is a filing-accuracy penalty under IRC §6721 and §6722, issued when you file Forms 1094-C or 1095-C late or with incorrect taxpayer identification numbers. This penalty applies per return, not per employee, and the amount depends on how late the filing was corrected.
If you filed for a valid extension using Form 8809, check whether it applies to the tax year in question. If not, you may need to request reasonable cause abatement, which requires showing the late filing resulted from circumstances beyond your control.
What Happens If You Don’t Respond to a Penalty Notice?
Each of these letters sits at a different stage of the same enforcement sequence. An unanswered Letter 5699 leads to Letter 5005-A, then CP215. An unanswered Letter 226J leads to a formal ESRP demand. Either path can end in a CP504B notice, giving the IRS authority to levy business assets.
Responding within the stated deadline, whether that’s 30 or 90 days, is what keeps your organization inside the window where a penalty can be reduced or eliminated.
How Should Employers Prepare for a 2024 or 2025 Tax Year Notice Now?
Having the right records on hand speeds up your response, especially if the IRS’s figures don’t match your actual workforce. Before a letter arrives, it’s worth maintaining up-to-date records on:
- Employee start and end dates, and hours worked per month
- W-2 wage data for the 2024 and 2025 tax years
- Records of coverage offers made to each employee
- Documentation showing whether coverage met Minimum Essential Coverage and minimum value standards
- Copies of Forms 1094-C and 1095-C as originally filed
These same data checks are what help avoid Letter 226J and IRS penalties before a notice is ever issued.
One Response Process, Five Different Letters
The letter you receive determines the clock you’re on and the evidence you need, but the underlying task is the same: prove your data, not just explain your intentions. Many employers spend their first week with a notice simply figuring out what kind of letter they’re holding.
We’re seeing both waves at once. 2025 tax year notices are already arriving, and 2024 Letter 5699s and 226Js are still showing up too. The two enforcement cycles can overlap, so a quiet mailbox today doesn’t mean a quiet one next month.
Once you know which letter you’re holding, Trusaic’s IRS Penalty Letter Response service can audit the underlying data, pinpoint the error, and build your response before the deadline closes.
