IRS Hits Staffing Firms With ESRP Notices For 2015

by Brian E. Curtis, Esq.,

As many of you know, the IRS has sent out the first round of letters (“ESRP Notices”) to employers it believes are subject to penalties for failure to comply with the ACA for the 2015 tax year. A number of our clients here at Becker have received these notices. We anticipate the IRS sending additional rounds of ESRP Notices to staffing firms in the upcoming weeks and you should be prepared to respond in the event your company receives a notice.

At first glance, these notices can be intimidating (because the amount of the initial assessment can be quite significant climbing into the millions) and daunting (because the process for properly and effectively responding to the IRS and defending your company has a number of procedural steps). The good news is that our team has been successful in helping clients respond to these notices; we have been successful in helping reduce and in some cases, even eliminating the monetary penalty that they may be facing.

There are a few key points to understand when you get these notices:

  • Respond immediately! This is a letter that cannot sit and wait, do not ignore this. You may agree or disagree with the proposed penalty, just remember that failing to respond is similar to agreeing to the penalty
  • Request an extension for additional time to respond, the IRS has been very accommodating in granting extensions. Just ensure that your request for an extension is within a reasonable time frame
  • Determine whether you made a reporting error or actually failed to provide compliant insurance. Consult someone knowledgeable about the ACA and who has experience responding to these notices to help you make this critical determination
  • If you made a reporting error, make sure you follow the right procedure to correct it. First, make sure you correct the reporting. Second, gather all of the documentation supporting your contention that it is a reporting error. You will have to provide that information along with a persuasive explanation to the IRS
  • Know what to look for in determining if errors in reporting could work in your favor. Remember, the ACA has built into it several “safe harbors”, as well as administrative periods, affordability factors, and Medicaid provisions, any or all of which could help reduce or eliminate your overall penalties; and
  • If you did not provide compliant insurance, conduct an internal audit to assess the extent of your liability. The IRS often over estimates the extent of the error and seeks to impose a penalty far in excess of actual liability.

The bottom line is that while these notices can be intimidating and daunting, if you follow the right process and formulate the correct response, you can reduce your exposure. If you receive a notice, please feel free to call us. We are happy to share our experience in responding to ESRP Notices and answer any questions you might have about responding to the notices.

About Staffing at Becker
Staffing at Becker is a premier mid-market firm recognized as a leader in the staffing industry serving New York, New Jersey, Philadelphia and California. The firm provides forward thinking, mission-critical advice to staffing industry entrepreneurs and management on high stakes, complex legal matters as well as day-to-day matters and long-terms plans. The firm serves as general counsel to the Mid-Atlantic Staffing Association and is a member of both the New York Staffing Association and New Jersey Staffing Association. For more information, visit

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