Letter 227 (227-J, 227-K, 227-L, 227-M, 227-N, 227-O): The IRS Answers Your Letter 226-J Response

What Letter 227 is

The IRS page calls these letters “acknowledgement letters sent to close an Employer Shared Responsibility Payment (ESRP) inquiry or provide the next steps.” An ESRP is a payment section 4980H of the tax code can require of a large employer when the IRS allowed a full-time worker a premium tax credit, a tax credit that helps pay for a health plan.

The IRS sends a Letter 227 after it reviews the employer’s answer to Letter 226-J, the letter that first proposed the payment.

The six versions of Letter 227

The IRS page lists six versions. Letter 227-J confirms your signed agreement on Form 14764, ESRP Response, and says the IRS will assess the payment, or record it as owed. Letter 227-K shows the proposed payment cut to zero. Letter 227-N reports the decision of the IRS Independent Office of Appeals, the IRS office that hears disputes. All three close the case and need no response.

Letter 227-L shows a revised payment, and Letter 227-M says the payment did not change. Each comes with an updated Form 14765, Employee Premium Tax Credit (PTC) Listing, and a revised calculation table.

The IRS page says Letter 227-O goes to “Tax Exempt and Government Entities customers.” It shows a revised payment and comes with an updated ESRP summary table and Form 14764. The IRS page does not say whether it needs a reply, so follow the letter’s instructions. The IRS manual’s table names only the other five letters (IRM 25.21.4.15).

Letters 227-L and 227-M: how to respond

The IRS page tells you to “complete and return the letter 227-L or 227-M by the date provided.”

If you agree, the IRS page says to sign the response form and return it with full payment. If you disagree, the page says you must explain why, show the changes you need on Form 14765, or do both. You can also ask to meet the examiner’s manager, Appeals, or both. The examiner is the IRS employee working your case. For questions or more time, use the contact information in the letter.

What happens after Letter 227

If you agree with a 227-L or 227-M, the IRS manual says the examiner mails Letter 227-J, assesses the payment and closes the case (IRM 25.21.4.15.3). The bill, Notice CP220J, follows.

Silence has a cost. If you do not answer a 227-L or 227-M by the date on the letter, the manual says the examiner closes the case “based on the information in the Letter 227-L or Letter 227-M” (IRM 25.21.4.15). The payment on that letter goes forward without your side of the story.

For practitioners: what to check before you respond

Start with the trap. The IRS manual for Collection Due Process (CDP) hearings, an Appeals hearing on collection, lists Letter 227-L among the letters that can count as an earlier chance to dispute the amount. The same section says a signed Form 14764 agreeing to the payment bars a later challenge to that liability (IRM 8.22.8.3). So answer a 227-L or 227-M as if a later collection hearing may not reopen the amount.

Next, check the inputs. The IRS page tells employers to review the Forms 1094-C and 1095-C they filed and to confirm that the IRS used the Letter 226-J response.

Then size the Appeals request. The manual says an Appeals request needs a protest, a written statement of why the employer disagrees. When the proposed payment for all months of the year totals $25,000 or less, a letter with the reasons serves as a small case request; above $25,000, the employer must send a formal written protest (IRM 25.21.4.15.4).

What people mistake Letter 227 for

Some employers read Letter 227 as a bill. The IRS page says it is not; the bill, if one comes, is Notice CP220J. Others take a 227-M as the final word, but it still lets you agree or ask for a meeting by the date on the letter.

Common Questions