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Understanding IRS 227 Letters

If you have started to receive and respond to Letter 226-J from the IRS regarding potential Employer Shared Responsibility Payment (ESRP) for tax year 2015 under the Affordable Care Act (ACA), you may have questions regarding the IRS follow up with Letter 227. The potential assessment is made when the IRS determines that one or more the employees was enrolled in a qualified health plan for which a premium tax credit was allowed.

Once the employer responds to the Letter 226-J, the IRS will respond with one of five versions of Letter 227.

  • Letter 227-J acknowledges the receipt of the signed agreement, ESRP Response (Form 14764) and the ESRP will be assessed. After this Letter 227 is issued, the case will be closed. No response is required.
  • Letter 227-K acknowledges the receipt of the employer-provided information and shows the ESRP Response has been reduced to zero. After this Letter 227 is issued, the case will be closed. No response is required.
  • Letter 227-L acknowledges the receipt of the employer-provided information and shows the ESRP has been revised. The letter will include an updated Employee Premium Tax Credit Listing (Form 14765) and revised calculation. The employer can agree and sign the new Form 14764 or request a meeting with the IRS Office of Appeals.
  • Letter 227-M acknowledges the receipt of the employer-provided information and shows the ESRP has not changed. The employer can agree and sign the new Form 14764 or request a meeting with the IRS Office of Appeals.
  • Letter 227-N acknowledges the decision reached in Appeals and shows the ESRP based on the Appeals review. After this Letter 227 is issued, the case will be closed. No response is required.

These letters are not bills but are acknowledgment letters sent to close the ESRP inquiry (Letter 226) or provide information on the next steps. If a penalty is assessed, the IRS will send Notice CP220J with the finalized amount due.

For more information on Letter 227, visit the IRS website.