IRS Letters

IRS Letter 5699: Missing 1094-C/1095-C ACA Filings — What It Means and How to Respond (2026)

By Angeline Balsitis, EA · Reviewed by Melissa Ly, Chief Tax Officer · Published July 8, 2026 · Updated July 7, 2026 · Editorial Standards

There's no dollar amount anywhere on this letter — and that's what makes it different from almost everything else the IRS mails. Letter 5699 is a question, not a bill: the IRS counted the W-2s filed under your EIN, decided you may have crossed the 50-employee line, and wants to know why it never received your health-coverage forms. The box you check decides whether this closes quietly or becomes the most expensive letter your business ever ignored.

The image below shows exactly what Letter 5699 looks like and where to find the two facts that control your case: the reporting year the IRS is asking about and the date your response is due.

Why you got Letter 5699

Letter 5699 goes to businesses whose W-2 counts suggest 50 or more full-time employees but that filed no Forms 1094-C or 1095-C for the year in question. Under the Affordable Care Act, an Applicable Large Employer (ALE) must file a 1095-C for each full-time employee and a 1094-C transmittal every year — whether or not it offered health coverage. The IRS cross-matches the W-2s and payroll returns filed under your EIN against the ACA filings it received; where W-2s exist and ACA forms don't, Letter 5699 goes out.

Two quirks matter. First, the W-2 match over-counts: the IRS's screen includes part-time and seasonal workers, so businesses that were never actually ALEs get this letter regularly. Second, the year on the letter is usually two or more years back — the ACA compliance unit runs well behind the calendar, which is why a 2023 question can land in a 2026 mailbox.

One thing Letter 5699 is not: an audit of your income tax return, and it's not addressed to you personally as a worker — it's an employer-reporting inquiry tied to your business EIN. For a plain-English map of how IRS letters differ, see why did I get a letter from the IRS.

First: confirm whether you were actually an ALE that year

You were an Applicable Large Employer for a year only if you averaged 50 or more full-time employees plus full-time equivalents during the prior calendar year. That test has moving parts, and each one is a place the IRS's W-2 screen can get it wrong:

• Full-time means 30+ hours per week (or 130 hours per month). A staff of 60 people where 25 work part-time may not be an ALE at all.
• Part-timers count fractionally. Add all part-time hours in a month and divide by 120 to get full-time equivalents, then add those to your full-time count.
• The prior year controls. Letter 5699 asking about 2023 means the headcount test runs on 2022.
• The seasonal-worker exception: if your workforce exceeded 50 for 120 or fewer days and the excess was seasonal workers, you're generally not an ALE for that year.
• Aggregation cuts the other way: companies under common ownership are counted together as one employer. Two 30-employee companies with the same owner can be a 60-employee ALE — this is the trap that catches owners who assumed each entity stood alone.

Run this math before you touch the response form. If the honest answer is "under 50," your entire response is a headcount worksheet — and the case can close with nothing owed.

What happens if you ignore Letter 5699

Ignoring Letter 5699 lets the IRS assess penalties for every missing form and compute an ACA employer penalty without your input. The sequence runs in stages, and each stage takes options off the table:

1. Letter 5699 — the inquiry stage. You are here. Nothing has been assessed; every good outcome is still available.
2. Non-response — the IRS is not obligated to send another warning. Your file moves from "question" to "non-filer."
3. Information-return penalties — failure-to-file penalties under IRC §6721 (forms owed to the IRS) and §6722 (statements owed to employees), often proposed on Notice 972CG or billed on a CP215 notice. Silence also risks the "intentional disregard" label, which raises the per-form amount and removes the annual cap.
4. Letter 226-J — a proposed Employer Shared Responsibility Payment, computed from IRS data alone, with its own short response window (typically 30 days). Because you never filed, the IRS's numbers — not yours — set the starting point.
5. Letter 227 — the IRS's decision on your 226-J response, followed by assessment and a demand for payment.
6. Collection — once assessed, the balance moves into the standard business collection track: demand notices, then federal tax lien and levy authority against business accounts.

One more reason non-response is uniquely dangerous here: the IRS's position is that no statute of limitations runs on the Employer Shared Responsibility Payment for a year in which the 1094-C/1095-C were never filed. Income tax exposure eventually ages out; an unfiled ACA year stays open until you file. Doing nothing doesn't run out the clock — it stops the clock from ever starting.

Holding a Letter 5699 right now?

The wrong checkbox — or silence — can turn a records question into a six-figure ACA assessment. Get your Letter 5699 and your headcount math reviewed free before the response date printed on your letter passes.

Get My Free Case Review Call (888) 825-7779

Letter 5699 escalation sequence: what happens when

Your five response options on Letter 5699

Letter 5699 gives you five checkboxes, and exactly one of them fits your situation. No payment goes with the response — this stage is about facts, not money. The table below decodes each box:

Two tactical notes. If you commit to the 90-day option, treat that date as immovable — a second miss is what earns the intentional-disregard treatment. And if you're preparing the forms now, remember the e-file rule: 10 or more information returns must be filed electronically through the IRS's AIR system, not on paper.

What a missed year can cost: the math, worked out

Say you own a courier company that put 55 W-2 drivers on payroll in 2023 — and never filed a 1094-C or any 1095-Cs for that year or the two after it. Letter 5699 arrives asking about 2023. This is hypothetical, and it uses an illustrative $250 per form (actual per-form penalty amounts are inflation-adjusted each year), but the structure is exactly how the exposure stacks:

• §6721 — forms never filed with the IRS: 55 × $250 = $13,750
• §6722 — statements never furnished to employees: 55 × $250 = $13,750
• One year's information-return exposure: $27,500 — every missing 1095-C counts twice, once for each copy the law required.

With three years unfiled, that same math runs three times — roughly $82,500 before anyone even asks about health coverage. Then comes the separate question Letter 226-J exists to ask: if the company never offered coverage to substantially all full-time employees and even one driver bought a marketplace plan with a premium tax credit, the §4980H(a) payment applies to all full-time employees minus 30. At a rate that has run near $3,000 per employee per year in recent years, that's 25 × ~$3,000 ≈ $75,000 per year — on top of the form penalties.

Now the other side of the ledger: respond on time, file the missing returns with a reasonable-cause explanation, and the picture changes. Penalties for late-but-voluntary filing are lower than intentional-disregard penalties, annual caps apply, and reasonable-cause penalty abatement can reduce or remove §6721/§6722 charges where the failure had a genuine explanation — a payroll provider that dropped the ball, a first year over the 50-employee line, records lost in a disaster. And if coverage was actually offered, documenting it in the filings is what prevents the 226-J math from ever being run against you.

How to respond to Letter 5699, step by step

1. Find the tax year and response date. Page one of Letter 5699 names the reporting year in question and the date your response is due — those two facts control everything that follows.
2. Run the ALE test for that year. Count full-time employees (30+ hours per week) plus full-time equivalents for the prior calendar year, combining any companies under common ownership.
3. Check the one box that matches. Pick exactly one of the five response options — already filed, filing now, filing within 90 days, not an ALE, or other — and attach the proof that option calls for.
4. Prepare the missing returns if you owe them. Complete Form 1094-C and a Form 1095-C for every full-time employee; 10 or more information returns must be e-filed through the IRS AIR system.
5. Respond by the printed date with proof of delivery. Send your response to the address or fax number on the letter, keep a complete copy, and use a delivery method you can track.
6. Get a review if multiple years are open. Three unfiled years or a likely coverage gap means real Letter 226-J exposure — have an experienced tax professional check the math before you respond.

When you can handle this yourself — and when help changes the outcome

Many Letter 5699 responses are safely do-it-yourself. If you already filed and just need to point the IRS to the right EIN, check the first box with your filing details and you're done. If you're a single entity with no related companies and your prior-year average was clearly under 50 full-time employees plus FTEs, the non-ALE box with a clean headcount worksheet usually closes the case. If you missed one recent year, offered coverage, and your payroll software can generate the 1095-Cs, filing them with your response is straightforward.

Experienced help earns its cost in four situations. Multiple unfiled years — the sequencing of what you file, and the reasonable-cause story you attach, changes the total. Aggregation questions — common ownership across entities is technical, and getting it wrong in either direction is expensive. A real coverage gap — if no plan was offered, filing accurately while preparing the coming Letter 226-J defense is a strategy problem, not a paperwork problem. And penalties already assessed — a CP215 on the account means the fight has moved to business penalty abatement, with its own deadlines and standards. If your business also has unfiled income returns, know that the IRS runs a separate track for those — a Letter 1085 proposing a substitute return — and the two problems are best solved together, not one letter at a time.

Terms on your letter, decoded

• Applicable Large Employer (ALE): a business that averaged 50 or more full-time employees plus full-time equivalents in the prior calendar year, counting commonly owned companies together.
• Full-time equivalent (FTE): part-time hours converted into fractional employees — add all part-time hours in a month and divide by 120.
• Form 1094-C: the cover-sheet transmittal an ALE files with the IRS summarizing its 1095-C forms and coverage offers.
• Form 1095-C: the per-employee statement showing what coverage was offered to each full-time employee, filed with the IRS and given to the employee.
• Employer Shared Responsibility Payment (ESRP): the ACA penalty under IRC §4980H for not offering adequate, affordable coverage — proposed via Letter 226-J.
• AIR system: the IRS's Affordable Care Act Information Returns e-filing platform, required when you file 10 or more information returns.

Letter 5699 FAQs

Your next 24 hours

1. Pull two facts off page one of the letter: the reporting year the IRS is asking about and the respond-by date. Write both on your calendar today — the printed date is the only deadline that matters.
2. Gather the headcount evidence: payroll reports and W-2 counts for the letter's year and the year before it, hours data for part-timers, and the ownership structure of any related companies.
3. Get the letter reviewed free before you check a box. Send us a photo of your Letter 5699 at the 2-minute form or call (888) 825-7779 — an experienced tax professional will run the ALE math with you and map the response that closes this before the printed date passes.

For the IRS's own employer guidance, start with the ACA information center for employers at IRS.gov. If penalties are later assessed and you need to pay while contesting them, payment options are at IRS.gov/payments, and businesses facing hardship from IRS delays can contact the Taxpayer Advocate Service.

This guide is general information, not tax or legal advice for your specific situation. Eligibility for IRS programs depends on individual facts and circumstances; no outcome is guaranteed.

Related: further along in the ACA sequence? See our guides to Letter 226-J and Letter 227 — or start with why did I get a letter from the IRS and browse all guides.