As the IRS continues to sharpen its enforcement of ACA reporting obligations, employers are increasingly seeing Letter 5699 notices arrive in the mail. For the 2023 tax year, IRS issuance is already underway — and given the increased efficiency of the IRS, the 2024 tax year letters could be around the corner.
If your organization receives a Letter 5699, you must treat it seriously. While it does not immediately carry a penalty, it’s a warning signal — and your response (or failure to respond) can determine whether noncompliance turns into costly fines.
This blog will walk through what Letter 5699 is, how it’s being used, and what steps you should take to respond and protect your organization.
What Is IRS Letter 5699?
Letter 5699, formally titled “Missing Information Return Form 1094/1095-C,” is a preliminary IRS notice sent to entities the agency believes are Applicable Large Employers (ALEs) but who have not filed required ACA information returns.
In essence, the IRS uses cross-checks — often from W-2 filings or other employer data — to identify potential non-filers. If they find that an employer’s filings for a given tax year are missing from their records, Letter 5699 is the initial step to prompt a response rather than leap to penalties.
Critical points to understand:
- Letter 5699 is not itself a penalty notice. It’s a request for clarification or correction.
- It typically gives 30 days from the date of the letter to respond.
- If no satisfactory response is received, the IRS may escalate with further inquiry or impose penalties.
Why the IRS Is Issuing 5699 Notices for 2023
The IRS has ramped up use of Letter 5699 as part of its efforts to enforce the ACA’s Employer Mandate more aggressively.
Some key indicators:
- Notices for the 2023 tax year are being sent now, signaling that the IRS is accelerating its compliance program.
- Legal precedent exists: 5699 letters were also being issued for 2022 tax year instances.
- Analysts anticipate that similar letters will be dispatched for 2024 non-filings as soon as IRS systems reconcile W-2 and employer data.
- As ACA enforcement tightens, responses to 5699 will bear closer scrutiny.
Given this trend, if you didn’t file on time for the 2023 tax year — even if you have since filed — there is potential risk.
What Can Happen After Letter 5699?
If Letter 5699 is ignored or mishandled, potential consequences include:
- The IRS proceeding to Letter 5005-A or penalty notice
- Automatic assessments of filing penalties under IRC § 6721/6722 for missing information returns
- Escalated enforcement and audit scrutiny
- Additional costs (including interest charged on penalties), reputational impact, and internal compliance burden
Because 5699 is a formal request to explain or correct, a timely and accurate response may avoid escalation.
Steps to Take Immediately Upon Receiving Letter 5699
If your organization receives one, here’s a structured approach to respond:
1. Review the Letter Carefully
- Confirm the correct EIN, tax year, and organization name
- Check whether the IRS already thinks you are an ALE for that year
- Understand the response deadline (usually 30 days)
2. Determine Your Filing Status
- If you have already filed under the given EIN, provide proof and filing date
- If you have not filed, evaluate whether you should submit the missing 1094-C / 1095-C forms
- If you were not required to file, prepare a clear explanation and documentation supporting your position
3. Gather Supporting Documentation
- Payroll & headcount data used to assess ALE status
- ACA eligibility & coverage offers data
- Copies of any prior filed Forms 1094-C / 1095-C
- Any communications or corrections relevant to that tax year
4. Submit Your Response
- Choose the correct response option in the letter (e.g. filed under another EIN, intend to file, not ALE)
- Include necessary forms, explanations, or evidence
- Send via certified mail or as instructed in the notice
5. Monitor and Follow Up
- Confirm IRS has acknowledged receipt
- Track whether a penalty letter follows
- Be ready to escalate response or appeal if necessary
How to Prepare Now to Avoid Receiving Letter 5699
Given the trend, every organization should take preventive steps:
- Confirm ALE status annually so you don’t mistakenly skip filing
- Ensure timely and accurate filings for 1094-C / 1095-C
- Validate data across systems (payroll, benefits, HR) to avoid misalignment
- Maintain audit-ready records year-round
- Leverage Penalty Risk Assessment tools to detect non-filing risk before IRS does
How Trusaic Can Help
Trusaic’s ACA Compliance Solution supports your response and prevention strategy:
- Automated filing checks and alerts when filings are missing or incomplete
- Penalty Risk Assessment to surface non-filing risks in advance
- Integrated data validation across payroll, benefits, and HR systems
- Expert guidance for crafting response letters to IRS notices
With ACA audit pressures mounting, such tools are no longer optional — they’re essential.
Schedule a demo today to see how Trusaic can help with ACA non-filer risk and streamlined responses.