Got IRS Letter 5699 about ACA reporting? Here is what it means and what to do.
The IRS sends Letter 5699 when it has no Forms 1094-C and 1095-C on file for an employer it believes was an applicable large employer. It asks for a response within 30 days. This page explains the letter, using what the IRS letter and the IRS manual say. It is general information, not legal or tax advice.
Three things to know before you do anything else.
What the Letter Is
The IRS letter is titled as a missing information return letter for Forms 1094-C and 1095-C. It states the IRS records show you may have been an applicable large employer (ALE) for a year and that it has not received the required returns under your taxpayer ID number.
It Is a Request, Not a Bill
The letter does not assess a penalty. It asks you to check the box that applies and mail a response, and it warns that failing to file or furnish may result in penalties under Internal Revenue Code Sections 6721 and 6722.
Thirty Days to Respond
The letter tells you to mail your response to the address at the top within 30 days from the date of the letter, not the date you opened it. Put the response deadline on the calendar the day the letter arrives.
The five boxes you can check.
Already Filed
Check this box if you were an ALE and already filed Form 1094-C and Forms 1095-C. The letter asks for the name and employer identification number you filed under and the date you filed. This is the box for returns filed under a different name or number.
Enclosing the Forms
Check this box to include the forms with your response. The letter states not to use it if you are required to file electronically, and to explain the reasons for late filing under Other.
Will File by a Date
Check this box and give the name, EIN and the date you will file. The letter states that if the date is more than 90 days from the date of the letter, you must explain the reasons under Other.
Not an ALE
Check this box if you were not an ALE for the year named and explain your reasons under Other. This is where a headcount below the threshold, or a different reporting entity, would be explained.
Other
Use this box, or attach a statement, to explain why you have not filed the required returns and what actions you plan to take. The letter treats a late filing explanation as part of your response.
Add Your Contact Information
The letter asks you to include a daytime telephone number and the best hours to reach you. Use the contact information at the top of the letter for questions.
What decides whether the letter applies to you.
Fifty or More Full Time Employees
The letter states an employer is an ALE for a year if it had an average of 50 or more full time employees, including full time equivalent employees, during the preceding calendar year. The year before the one named in the letter is the year to count.
Related Companies Count Together
The letter points to specific rules for employers in an aggregated group under Internal Revenue Code Sections 414(b), (c), (m) and (o). If you share ownership with another company, have your adviser confirm how the group is treated.
Electronic Filing Is Often Required
The letter states employers filing 10 or more information returns of any kind must file electronically, and that the requirement does not apply if you request and receive a hardship waiver. The IRS says ALEs file ACA returns through its Affordable Care Act information returns system.
The IRS process after you respond, or do not.
If You Respond
Your answer decides the path. The IRS manual says the letter asks employers to mark the box that fits and return it. If you were not an ALE or already filed, your support should show it. If you will file late, the IRS expects the forms.
If You Do Not Respond
The IRS manual states a follow up letter, Letter 5698, is issued if there is no response. If there is still no response, the case is assigned to an examiner to consider penalties for failure to file and failure to furnish.
A Penalty Letter Is Separate
A different IRS letter, Letter 226-J, concerns a possible employer shared responsibility payment and is based on returns that were filed. It generally gives 30 days to respond, and the IRS manual states reasonable cause does not apply to that payment.
What the IRS publishes for late or missing returns.
Per Return Amounts
The IRS publishes a per return penalty that rises with lateness. For returns due in 2025, which covers tax year 2024, it is $60 within 30 days, $130 from 31 days through August 1, and $330 after August 1 or not filed. For returns due in 2026 the last figure is $340.
Statements Count Too
The IRS states it charges penalties for each information return not filed correctly or on time and separately for each payee statement not provided correctly on time. An employee form not furnished can add its own penalty.
Reasonable Cause Relief
The IRS states it may remove or reduce an information return penalty if you acted in good faith and can show reasonable cause. Acting responsibly before and after the failure, and having significant reasons, are the tests it names.
What late or missing returns can cost.
These are illustrations built on the rates the IRS publishes, using a hypothetical employer. They are not a prediction of what the IRS would assess, and annual maximums can lower the total.
Example: Filed Within 30 Days
A hypothetical employer with 120 full time employees files one Form 1094-C and 120 Forms 1095-C, which is 121 returns, and furnishes 120 employee statements, which is 241 penalty units in all. For returns due in 2025, the rate is $60 each when filed up to 30 days late. 241 times $60 is $14,460.
Example: Filed 31 Days Late Through August 1
Same employer, same 241 units. The rate for returns due in 2025 rises to $130 each in this window. 241 times $130 is $31,330.
Example: Filed After August 1 or Never
Same employer. The rate for returns due in 2025 is $330 each after August 1 or when not filed. 241 times $330 is $79,530. For returns due in 2026 the rate is $340, which makes 241 times $340 equal to $81,940.
Example: Intentional Disregard
The IRS publishes $660 each for returns due in 2025 and $680 for returns due in 2026 where there is intentional disregard, and states there is no maximum. For the same 241 units at $660 that is $159,060.
Example: A Few Statements Missed
The employer files every return but fails to furnish 5 employee statements and does not fix it before August 1. The IRS charges each statement separately: 5 times $330 is $1,650 at the rate for returns due in 2025.
Why Annual Maximums Matter
The IRS states the maximum penalty is different for small businesses and large businesses, and points to Publication 1099 for details. The examples above do not apply a maximum, so a real total may be lower. Ask your adviser to run your numbers.
A different set of penalties, based on the coverage you offered.
Information return penalties punish a filing failure. Employer shared responsibility payments under Internal Revenue Code Section 4980H are based on coverage. The 2026 amounts below come from the IRS indexing notice, Rev. Proc. 2025-26.
Two Different Penalty Families
Sections 6721 and 6722 penalties apply to returns and statements that are late, missing or wrong. Section 4980H payments apply to coverage that is not offered, not affordable or not minimum value. Filing on time does not erase a coverage problem, and filing late does not create one.
The A Payment
Applies when an ALE does not offer minimum essential coverage to at least 95 percent of its full time employees and their dependents and at least one full time employee receives a premium tax credit. For 2026 it is $3,340 per full time employee, excluding the first 30, figured monthly.
Example: A Payment
A hypothetical ALE with 100 full time employees fails the 95 percent test for all 12 months of 2026, and one employee gets a premium tax credit. 100 less 30 is 70, and 70 times $3,340 is $233,800 for the year.
The B Payment
Applies when coverage is offered but is not affordable or does not provide minimum value, and an employee receives a premium tax credit. For 2026 it is $5,010 per such employee, figured monthly, and the total cannot exceed what the A payment would be. The 2026 affordability threshold is 9.96 percent.
Example: B Payment
A hypothetical ALE offers coverage, but the lowest cost option is unaffordable for 10 full time employees who each receive a premium tax credit for all 12 months of 2026. 10 times $5,010 is $50,100, which is below the A payment cap for an employer of this size.
Reasonable Cause and Letter 226-J
Letter 226-J is the IRS letter that proposes a payment, based on filed Forms 1094-C and 1095-C and employee tax returns. It generally allows 30 days to respond. The IRS manual states that reasonable cause relief does not apply to the payment itself.
Where employers go wrong with this letter.
Ignoring It
Not responding sends the case toward a follow up letter and then possible penalties. Even if you plan to dispute the letter, respond within the 30 days.
Answering Before Checking Status
Do not check Not an ALE or Already Filed until you have confirmed your headcount and your filing history. A wrong answer creates a second problem.
Missing Other Years
The letter names one year, but the same gap may exist for other years. Check every year you were required to file before you decide what to send.
Sending Paper When You Must E-File
The letter states the enclosed forms option does not apply if you are required to file electronically. Confirm the filing method before you mail anything.
Promising a Date You Cannot Meet
A filing date more than 90 days out needs an explanation. Pick a date you can reach and tell the provider who is doing the work.
Waiting to Tell Your Adviser
The clock is 30 days from the letter date. Send a copy to your broker, adviser or filing provider the same week you receive it.
Pick the next page.
Past and Future Filings Guide
How to catch up the missing years and set up filing for the years ahead, and what to ask a filing provider.
ACA Reporting
What ACA employer reporting involves each year and how we can help you with the filing.
Late ACA and Form 5500 Filings
Help catching up on late and back filings.
Six questions to answer before you respond.
Were We an ALE That Year?
Ask HR and payroll for the full time and full time equivalent headcount for the year before the one named in the letter.
Did We File Under Another Name?
Ask whether returns were filed under a different company name or EIN, including by a prior provider.
Which Years Are Missing?
Ask whoever handled filings to confirm every year filed and every year not filed.
Who Will Prepare the Forms?
Ask which provider will prepare the late returns and whether it can file them electronically.
Can We Meet Our Own Date?
Ask what date is realistic, and whether it falls inside 90 days of the letter.
Who Is Watching the Deadline?
Ask who owns the response and the 30 day date, and put it in writing.
What we do when this letter lands.
Read the Letter With You
Send us the letter and we will go through what it asks, which box fits and what date applies. You keep the original for your records.
Sort Out Which Years Are Missing
We can help you work out which years need to be filed and what information the forms will require.
Connect You With Filing Help
We can help you with the filing. We work with specialist partners, including one that catches up prior years and another that runs reporting each year going forward. We do not give legal or tax advice.
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