Negotiating a Lower ESRP Penalty

Let's say a company that qualifies as an ALE simply did not provide health insurance to all FTEs from 2015-2018. Just didn't do it. Company just received ESRP assessment (total $ in the low 6 figures) for 2018. We are assuming that the IRS will look at prior years. If IRS assesses similar penalties for those years, it will put the client out of business. 

Will the IRS negotiate the amount of the penalty when the issue is NOT whether it was calculated correctly?

Any thoughts on talking to IRS to get a settlement for all years of liability and not just 2018?

Any other ideas or tips? 

Thanks!!!

Bring in benefits counsel.

I assume IRS is also asserting penalties for failure to file 1095's and 1094-c's?

16 hours ago, Luke Bailey said:

I assume IRS is also asserting penalties for failure to file 1095's and 1094-c's?

Not yet. But, I have found out that the IRS position is that they only go back three years so 2018 should be the only year for which there will be liability. 

Be careful with that.  Although they may not initially look back, they've explicitly stated a formal position that ACA penalties have no statute of limitations, so they may surprise the client later on.

I know you said there isn't an issue that the penalty wasn't calculated correctly, but it's still worth reviewing whether anything can be done to reduce the penalty...the variable hour rules sometimes provide a lot of relief.  The IRS, to its credit, recognizes that their information gathering is imperfect, and agents I have worked with have been very reasonable in recalculating the penalty.

On 5/4/2021 at 12:51 PM, Benefits Vet said:

Not yet. But, I have found out that the IRS position is that they only go back three years so 2018 should be the only year for which there will be liability. 

What ended up happening with this client?