CP220J Notice: The IRS Charged an Employer Shared Responsibility Payment

What the CP220J notice says

The IRS page for this notice says: “We charged you an employer shared responsibility payment (ESRP).” It tells you to read the notice for the due date, the amount due, and your payment options. The IRS’s ESRP questions and answers say the notice summarizes the payment and shows payments made, credits applied, and the balance due, if any.

The notice is a bill, not a proposal. The IRS has already assessed the payment on your account.

What the employer shared responsibility payment is

IRC 4980H applies to an “applicable large employer,” which the statute defines as an employer that employed an average of at least 50 full-time employees on business days during the preceding calendar year. The statute sets two payments. Section 4980H(a) applies for a month when the employer did not offer its full-time employees and their dependents the chance to enroll in minimum essential coverage, and at least one full-time employee enrolled in a qualified health plan with a premium tax credit or cost-sharing reduction. Section 4980H(b) applies when the employer did offer that coverage, but one or more full-time employees still enrolled in a qualified health plan with a premium tax credit or cost-sharing reduction.

The statute says the payment comes due “upon notice and demand” and that the IRS assesses and collects it “in the same manner as an assessable penalty.” The CP220J is that notice and demand. The IRS’s questions and answers add that an employer does not report the payment on any tax return and does not have to pay it before notice and demand. This page does not compute a payment; the notice states the amount, and the IRS page points to Treasury regulation sections 54.4980H-4 and 54.4980H-5 for the rules behind it.

How you got here

The IRS’s ESRP questions and answers describe the steps before this notice. The IRS bases its review on what the employer reported on Forms 1094-C and 1095-C and on which full-time employees received a premium tax credit. It sends Letter 226J when, for at least one month, a full-time employee received the credit and the employer did not qualify for an affordability safe harbor or other relief. The letter proposes the payment month by month, lists the employees behind it, and includes Form 14764, ESRP Response, for the employer to agree or disagree. If the employer responds, the IRS acknowledges the response with a Letter 227, and the employer may then ask for a conference with the IRS Independent Office of Appeals.

The IRS issues the CP220J at the end of that path in three cases. Either the employer did not respond to Letter 226J or Letter 227, or the employer agreed to the assessment on Form 14764, or the IRS or Appeals decided after the exchange that the employer owes the payment.

What you need to do

Pay by the due date on the notice if you can. The IRS page says interest runs on any outstanding balance until you pay it in full.

If you cannot pay the full amount now, the IRS page says you may be able to set up a payment plan through its online payment agreement application. Our collection alternatives router compares a payment plan with the other options for a business.

An unpaid balance can lead to enforced collection. The IRS page says an assessed ESRP is subject to lien and levy and that the IRS collects it in the same manner as other assessments. Before most levies, the IRS must send a final notice with hearing rights; our final notice of intent to levy page explains that notice.

The trap: an earlier chance to dispute the amount

If the business agreed to the payment on Form 14764, it cannot reopen the amount for those periods in a later collection hearing. In a Collection Due Process hearing, a taxpayer may usually challenge the tax itself only if it had no earlier chance to dispute it. The IRM adds that a taxpayer who signed a waiver form agreeing to the assessment cannot challenge that liability there, and it names “Form 14764, ESRP Response” as one of those waiver forms. The IRM also lists Letter 227-L and Letter 5040-J among letters that offer an Appeals hearing, which can count as that earlier chance even without a signed form.

So pull the file before you plan a dispute. Find the Letter 226J, any Letter 227, and the response the business sent back.

What people mistake the CP220J for

Some employers take the CP220J for another Letter 226J. The Letter 226J proposes a payment and asks for a response; the CP220J bills an amount the IRS has already assessed.

Others treat it as something to fix on a return. The IRS’s questions and answers say an employer does not report the payment on any tax return.

Common Questions