The IRS ACA audit process forces employers to prove their case or face penalties

A few weeks after the national election, the Internal Revenue Service began to issue notices to employers who may have failed to comply with the Patient Protection and Affordable Care Act.

These notices appeared to be the first salvo in the IRS ACA audit process. Failure to successfully defend this IRS audit could mean significant ACA related penalties. A recent industry report projects that companies could face up to $31 billion in ACA penalties in the 2016 tax reporting period for noncompliance with ACA requirements. These penalties, which include the Section 4980H penalties and Section 6721 and 6722 penalties, may be imposed on what the ACA terms Applicable Large Employers, or ALEs, namely, those employers with 50 or more full time or full-time equivalent employees.

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