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IRS Explains Letter 227


The IRS recently published additional guidance explaining the Letter 227, which is an IRS acknowledgement letter regarding an Applicable Large Employer’s (ALE) response to Letter 226-J (which notified the ALE of potential liability for an Employer Shared Responsibility Payment (ESRP)). The IRS used the information provided in response to the initial Letter 226-J to review the ESRP. The Letter 227 version explains the outcome of that review and the next steps to take to fully resolve the ESRP (if there are any).


Briefly, the guidance:

  • Explains the 5 versions of Letters 227, one of which will be issued to the ALE in response to receipt of the employer’s Letter 226-J submission (generally, Form 14764 and other materials as applicable).

  • Describes next steps the ALE should take, as necessary.

  • Provides answers to some commonly asked questions.

ALEs that responded to a Letter 226-J should anticipate receiving Letter 227 from the IRS. It is important to carefully review and address, as applicable, Letter 227 to preserve any available appeals rights.


Letter 227 is not a bill. A separate bill, CP220J, will be received after the ESRP has been assessed.


Letter 227 – Five Versions


Letter 227-J acknowledges receipt of the signed agreement Form 14764, ESRP Response, and that the ESRP will be assessed. After issuance of this letter, the case will be closed. No response is required.

  • In this instance, the ALE may receive a separate CP220J – which is the bill to pay any owed ESRP that was not previously paid.

Letter 227-K acknowledges receipt of the information provided and shows the ESRP has been reduced to zero. After issuance of this letter, the case will be closed. No response is required.


Letter 227-L acknowledges receipt of the information provided and shows the ESRP has been revised.

  • The letter includes an updated Form 14765 (Premium Tax Credit (PTC) Listing) and revised calculation table. The ALE can agree or request a meeting with the manager and/or appeals.


Letter 227-M acknowledges receipt of information provided and shows that the ESRP did not change. The letter provides an updated Form 14765 (PTC Listing) and revised calculation table. The ALE can agree or request a meeting with the manager and/or appeals.


Letter 227-N acknowledges the decision reached in Appeals and shows the ESRP based on the Appeals review. After issuance of this letter, the case will be closed. No response is required.

  • In this instance, the ALE may receive a separate CP220J – which is the bill to pay any owed ESRP that was not previously paid.

It’s important to note that if an ALE receives a 227-L or 227-M, a response is required.


Employer Action

  • An ALE that receives a 227-L or 227-M will need to complete the response Form 14764 indicating agreement or disagreement with the proposed ESRP.

  • If the ALE disagrees with the proposed assessment, the ALE must explain its reasoning and indicate any further changes on Form 14756. All documents must be returned to the IRS by the If response date.

  • the ALE agrees with the ESRP, sign the response form and return it with payment.


Helpful Hints

  • Review Forms 1094-C and 1095-C from the appropriate calendar year to determine whether the information the IRS shows is accurate with your records.

  • Review your submission to the IRS in response to the Letter 226-J.

  • Keep copies of any submission to the IRS for your records.

  • Contact the IRS at the phone number provided in the letter if you have questions or feel that you need additional time to respond.


For More Information

https://www.irs.gov/faqs/irs-procedures/notices-letters/understanding-your-letter-227


https://www.irs.gov/affordable-care-act/individuals-and-families/are-you-an-applicable-large-employer-review-your-status-annually


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