As an Applicable Large Employer (ALE), ACA compliance can be complex—especially if you've received IRS Letter 226-J or 5699. These notices indicate potential penalties for failing to meet ACA reporting or coverage requirements. Our ACA Penalty Reduction Service is designed to help ALEs respond effectively and reduce or eliminate these costly assessments.

We work directly with the IRS on your behalf, using proven strategies to negotiate penalty reductions and present valid defenses—such as reasonable cause, first-time penalty abatement, or corrections to inaccurate filings. Our team helps you understand the reason behind the penalty and guides you through the proper response process.

Whether you're facing thousands—or even millions—in proposed penalties, we provide the expertise and support needed to mitigate your exposure and bring you into compliance. With our help, 99% of our clients have successfully had their penalties reduced or avoided altogether, turning a major risk into a manageable resolution.

IRS Letter 226-J: Employer Shared Responsibility Payment (ESRP)

IRS Letter 226-J is sent to Applicable Large Employers (ALEs) who the IRS believes may owe an Employer Shared Responsibility Payment (ESRP) under the Affordable Care Act (ACA). This letter is based on a review of the employer’s filed Forms 1094-C and 1095-C, along with individual tax return data. It outlines the proposed penalty and gives the employer a chance to respond before the amount is finalized.

If you receive Letter 226-J, prompt action is critical. ACA Penalty Reduction services can help by reviewing the notice, identifying potential errors in your ACA filings, and determining if the IRS calculation is correct. These services assist in preparing a thorough response, including Form 14764 and a corrected Form 14765, to challenge or reduce the proposed penalty. With the right support, many employers can resolve discrepancies and significantly lower or even eliminate the ESRP. 

IRS Letter 5699: Non-Filing of ACA Information Returns

IRS Letter 5699 is sent to employers the IRS believes failed to file required ACA information returns for a specific tax year. It asks whether the employer was an Applicable Large Employer (ALE) and, if so, requests the missing Forms 1094-C and 1095-C or a written explanation if filing wasn’t required. A timely and accurate response is crucial—failing to respond can trigger significant penalties.

Our ACA Penalty Reduction Service helps employers address Letter 5699 by confirming ALE status, preparing late filings, and drafting responses that may qualify for relief under reasonable cause provisions. These services ensure that documentation is accurate, deadlines are met, and the employer’s position is clearly communicated to the IRS.

With expert guidance, many organizations have successfully avoided or reduced penalties by proactively correcting filing issues and demonstrating compliance efforts. Responding properly to Letter 5699 can prevent further IRS enforcement and minimize financial risk.

In conclusion; In both cases, professional support is essential due to the technical complexity and time-sensitive nature of IRS notices. Experts understand the specific documentation, deadlines, and language the IRS expects. A properly prepared and timely response can significantly reduce or eliminate penalties, saving organizations substantial financial costs, operational disruptions, and long-term compliance risks.