Reconcile your 14765 before the 90-day window closes.
Letter 226-J proposes an Employer Shared Responsibility Payment — it is not a final bill. The enclosed Form 14765 lists every employee-month the IRS thinks is assessable. This pack checks each one against your 1095-C codes and the three affordability safe harbors, and assembles your Form 14764 response.
What the pack does
- 90-day deadline calculator from your letter date
- 14765 month-by-month reconciliation vs your 1095-C codes
- 3 safe harbors computed: W-2, rate-of-pay, federal poverty line
- Corrected matrix showing which months stand and which don't
- 14764 assembly + evidence checklist + filing guide
Mechanics per IRS: Understanding Your Letter 226-J and the ESRP Q&A.
A proposed payment is not a final payment
Letter 226-J is the initial letter the IRS sends to applicable large employers to notify them they may be liable for an Employer Shared Responsibility Payment under IRC §4980H. The IRS built its proposal from your Forms 1094-C/1095-C plus the individual tax returns of your full-time employees — specifically, whether any of them were allowed a premium tax credit.
That proposal can be wrong in your favor. Common reasons the 14765 listing overstates assessable months:
- Safe harbors the IRS didn't credit. If your coverage was affordable under the W-2, rate-of-pay, or federal poverty line safe harbor, the month isn't assessable — even if an employee received a premium tax credit.
- Wrong full-time determination. Months coded 2B (not a full-time employee) or measured under the wrong method shouldn't be on the listing.
- Coding mismatches. The Line 14/16 codes on the 14765 are only as good as what was filed — transposed or stale codes create phantom assessable months.
The pack's job is to find exactly those months — with the arithmetic shown — so your response attaches math, not assertions.
Sources: P.L. 118-168 (congress.gov); IRS ESRP Q&A.
Every step shows its work
Deadline + eligibility (free)
Enter your letter date for the 90-day deadline, then answer five questions to confirm the pack fits: ALE status, 226-J in hand, tax year, and measurement method.
Employee/month entry
Upload a CSV or enter manually: per employee per month, the Line 14/16 codes from your 14765, PTC flags, and the pay figures each safe harbor needs.
Reconciliation engine
Every month is assessed: relief codes honored, ICHRA offers routed separately, and all three safe harbors computed from your figures with the formulas shown.
Corrected 14765 matrix
A month-by-month matrix flagging each month as assessable, relieved, or needing input — with the reason printed next to every flag.
14764 response assembly
Your agree/disagree positions organized per the Form 14764 ESRP Response structure, ready to transcribe onto the official form.
Evidence + filing guide
A checklist of exactly which documents support each finding (W-2s, payroll records, FPL tables), plus how to file and what Letter 227 means next.
Three safe harbors, two payment tracks
Affordability safe harbors
An ALE isn't liable for a §4980H(b) payment for a month if its coverage was affordable under any of:
- Form W-2 (code 2F) — employee cost ≤ indexed % of Box 1 wages
- Rate of pay (code 2H) — monthly cost ≤ indexed % of hourly rate × 130 (or monthly salary)
- Federal poverty line (code 2G) — monthly cost ≤ indexed % of mainland FPL ÷ 12
Source: IRS — Minimum value and affordability; our safe-harbor guide.
§4980H(a) vs (b)
(a) applies when the ALE offered coverage to fewer than 95% of full-time employees (and dependents) — with an "all but five" exception — and at least one FT employee received a premium tax credit.
(b) applies when at least 95% were offered coverage but at least one FT employee still received a premium tax credit — because they weren't offered coverage or the offer was unaffordable or lacked minimum value.
Source: IRS ESRP Q&A — liability.
Letter 226-J questions
No — it is a proposed assessment. The IRS Q&A states you have an opportunity to respond before any liability is assessed. If you don't respond by the response date, the IRS assesses the proposed amount and issues Notice CP 220J (notice and demand for payment).
The Employer Reporting Improvement Act (signed 12/23/2024) requires the IRS to give ALEs at least 90 days to respond to Letter 226-J. Note that IRS.gov's ESRP Q&A page still carries older "generally 30 days" language — always go by the response date printed on your letter, and use our free deadline calculator as a planning aid, not a legal determination.
Form 14765, the Employee Premium Tax Credit (PTC) Listing, lists by month your assessable full-time employees — people who were full-time for at least one month, were allowed a premium tax credit, and for whom you didn't qualify for a safe harbor or other relief — plus the Line 14/16 codes from each employee's Form 1095-C. Any month not highlighted is a month the employee received a PTC with no safe harbor or relief applied.
The IRS may send Letter 227 variants: 227-J (you signed an agreement — case closed), 227-K (ESRP reduced to zero), 227-L (revised ESRP with an updated 14765), 227-M (ESRP unchanged), 227-N (Appeals decision), or 227-O (revised ESRP for tax-exempt and government entities). After 227-L or 227-M, you may request a pre-assessment conference with the IRS Office of Appeals by the response date on the letter.
No. The pack reconciles your facts against IRS-published rules and shows the arithmetic. It does not recommend positions, select defenses, or predict outcomes. What you assert in your response is your decision (ideally with professional advice).