CP220J Notice: Demand for Payment of ESRP

Your Business Received a CP220J – Here’s the Bottom Line

CP220J means the IRS has officially assessed the Employer Shared Responsibility Payment (ESRP) against you. This IRS letter is a demand for payment, and ignoring it puts your business at high risk of collection actions. If you can't pay in full, the IRS has payment options – being proactive minimizes penalties and collection risks. 

This notice comes after Letter 226-J. That's the proposed penalty assessment, but now, the penalty is here. It's real. You can't challenge the penalty at this point – but you may be able to pay under protest and apply for a refund or request a reconsideration if you have new information. To protect your business, you need to make a plan now. 

Key takeaways

• Letter CP220J – ESRP was assessed for not meeting ACA requirements.
• Options – pay in full, request an installment agreement, or reach out to a tax professional to discuss more options. 
• Risks – the IRS can involuntarily collect the penalty from your business. 
• Personal liability – depending on your business's structure or other factors, you may face personal liability. 
• How to get help – find a tax professional who has experience representing businesses facing incorrect ACA penalties or dealing with unaffordable tax liabilities.  

What Is IRS Notice CP220J?

Notice CP220J is an ACA employer penalty bill. This letter means the IRS has assessed the ESRP. You now officially owe the penalty, and the IRS is demanding payment. If you don't pay or make arrangements, the IRS will pursue your business assets to involuntarily collect the penalty. 

Note that although the ESRP is commonly considered to be a penalty and sometimes even referred to as such by the IRS, it's actually an excise tax. 

The CP220J is much more serious than the previous letters, which proposed the penalty and gave you a chance to appeal. Whether you've ignored the other notices or incurred the penalty after an unsuccessful appeal, it's time to take action now before the IRS comes after you. 

The IRS sends this notice to Applicable Large Employers (ALE) who have violated the terms of the Affordable Care Act (ACA) by failing to offer minimum, affordable coverage to at least 95% of their full-time workers and their dependents, and at least one of their employees has received a Premium Tax Credit (PTC) for purchasing marketplace insurance. 

Is CP220J a tax bill or just a notice?

CP220J is a bill. It's not an informational notice. Assessment means that the penalty has been recorded against you – the IRS expects you to pay the amount shown on the notice. You can no longer dispute or appeal this penalty without paying first, unless you qualify for a reconsideration. 

How to Respond to CP220J

The right response depends on whether you agree with the penalty, disagree, or have questions. But in all cases, act quickly to protect your business from collection risks.

Can You Dispute an ACA Penalty After CP220J?

You have many appeal options before assessment, but once you receive CP220J, the options are limited to:

• Paying and requesting a refund
• Asking for reconsideration

In both cases, the IRS will accept new information unless you received a closing agreement under IRC 7121 and/or Appeals settled the case based on hazards of litigation. Your previous correspondence from the IRS should indicate whether either of these scenarios applied to you.

Requesting an ESRP refund

You can pay the penalty and request a refund with Form 843. If you only disagree with a portion of the penalty, you can pay that portion and request a refund on it, rather than paying in full, but be careful to ensure the IRS doesn't misapply the payment. When completing the form, remember this "penalty" is actually an excise tax. 

If you don't want to wait for the IRS to review the form, you can request an immediate denial. Then, the IRS will send you a Notice of Claim Disallowance, which gives you two years to file suit in the United States District Court that has jurisdiction or the United States Court of Federal Claims. Otherwise, you can wait for an IRS response. They'll either approve your refund request (rare) or send you a disallowance letter. 

Requesting reconsideration

If you haven't paid the penalty, you may request reconsideration in writing if you have new information to share. The same team or examiner who worked your original case will review your request for refund. If they agree, they will adjust the penalty, and if not, they'll send a disallowance, and then, again, you have two years to file suit in court. 

Pursuing ESRP Refunds in Court

If you end up petitioning the courts after a refund disallowance, work with an attorney to develop your defense. One taxpayers recently won a case, based on lack of HHS certification. 

In April 2025, the US District Court for the Notheast District of Texas ordered a refund of over $200,000 in ESRPs in Faulk Company, Inc. v. Xavier Becerra, et al. (government). The plaintiff, Faulk Company, alleged that their due process rights were violated – the ACA requires the Department of Health and Human Services (HHS) to certfy ESRPs to taxpayers before IRS assessment. 

However, HHS outsourced this job to the IRS years ago, and the IRS typically uses Letter 226-J as a certification. The court ruled that the law doesn't give HHS the right to delegate certification, thus rendering the ESRP assessment invalid and ordering a full refund. Prior to bringing this case to court, Faulk Company paid the assessed ESRP under protest, filed a refund claim, and after getting no response, filed the court petition. 

What's on the CP220J Notice?

The notice explains how much you owe for the ACA employer penalty, and what to do depending on whether you agree with the penalty, disagree, or have questions. Here's a breakdown:

• Notice info: The top right of the notice features the type of notice (CP220J), the tax period (December 31, 20XX), the notice date (date sent), your Employer Identification Number (EIN), and the IRS contact number. 
• Amount due: In bold letters on the left side of the notice, you'll see the amount due, and a brief statement saying the IRS has assessed the ESRP. 
• Reason for the penalty: This section also explains the two main reasons for incurring the penalty, but usually doesn't say which reason applied to you -- however, that should have been covered in earlier correspondence from the IRS. 
• Summary: This lists the ESRP amount, interest if applicable, payments and credits if applicable, and the amount due after considering the penalty, additions for interest, and credits for payments. 
• Contact information: The bottom of page one features a detachable stub to return to the IRS if you have questions. Note your EIN, phone number(s), and the best time(s) to reach you, and indicate if you have attached any additional correspondence. 
• What you need to do: This section on the second page outlines what to do next if you agree, disagree, or have questions, as explained in the chart above. 
• About this payment: Typically, on the bottom of the second page, this section explains how the ESRP works and the applicable Internal Revenue Code (IRC) sections (4980H(a) and 4980H(b)), giving the IRS the right to assess the penalty. 
• Shared responsibility for employers regarding health coverage: On the third page, this section explains how the IRS computes the penalty based on whether it was incurred under IRC 4980H(a) or (b). 
• Additional information: Here, you'll see links to IRS.gov/cp220j and other resources about the ACA, including the IRS's ACA resource page, the HealthCare.gov site, and info on the IRS collection process and taxpayer rights. 

If you're unclear about how to interpret this notice or what to do next, reach out to a licensed tax professional with ACA penalty experience. 

What Happens If You Don’t Pay CP220J?

Not paying the balance due on CP220J causes the balance to grow and puts you at risk of collection activities.

• Interest: accrues at the IRS's current quarterly rate, which is 2 points higher for corporations owing over $100,000. 
• Tax liens: attach to all business assets, including vehicles, equipment, inventory, bank accounts, and receivables; enter the public record, making it impossible to sell, borrow against, or even transfer certain assets.
• Bank levies: require your bank to place an immediate freeze on the funds in the account up to the amount owed, with no regard to outstanding checks or scheduled ACH transfers. 
• Asset seizure: auction of physical assets after IRS seizure or forced liquidation of intangible assets if applicable. The IRS may also padlock your business in rare cases if needed to seize assets. 

Refusing to pay an ESRP can also lead to broader collection actions – once you're on the IRS's radar, especially if a revenue officer is assigned to your case, they may put greater scrutiny on payroll, excise, corporate, or other business returns. Typically, the agency will become more likely to enforce collections and less likely to work with you on payments or relief options. 

The IRS typically can't shut down a business – except in cases of criminal activity – because businesses are formed and licensed on the state level. But the IRS can take everything you own and effectively force you to close. 

Payment Options for Employer Shared Responsibility Payments

If you can't pay in full, the IRS may allow you to set up the following options: 

• Simple payment plan for business – The IRS allows businesses that owe up to $50,000 in non-payroll tax debt to apply for a Simple Payment Plan. No financials required if you have a history of compliance and are up to date with filing returns. 
• Other business installment agreements – If you owe over $50,000, owe payroll debt as well, or can't make the minimum payment, you may still qualify for a business payment plan, but you'll need to submit financial information and work directly with the IRS. 
• Offer in compromise – The IRS allows qualifying businesses to settle certain types of tax debts for less than owed, including the ESRP. To qualify for an offer, you must prove that you cannot pay the penalty. However, you cannot apply for a settlement based on doubt as to liability with an ESRP – instead, you must take other routes to dispute the penalty, as explained throughout this post. 
• Currently not collectible – If a business cannot afford to pay anything, the IRS may agree to put CNC status on the account. Then, the agency pauses all collection actions but reviews your situation periodically to see if you can afford to start making payments. 

Alternatively, you may want to take care of the penalty outside of IRS programs – for example, by using a line of credit or borrowing against business assets. Talk with your accountant to assess the cash flow impact of all these options. 

Can You Discharge an ESRP in Bankruptcy?

Generally not, but sometimes, you can. It depends on the type of bankruptcy, whether the ESRP was assessed before you after you petitioned the bankruptcy court, and a few other factors. 

Chapter 7

ESRPs are treated as taxes, meaning they are priority claims, but they may be discharged if they were assessed at least 240 days ago and meet other conditions.

Chapter 11

It depends on whether the ESRP was pre- or post-petition. The IRS uses the date on the CP220J notice and the bankruptcy filing date to determine this, but often, to be on the safe side, the IRS files paperwork to cover both pre- and post-petition scenarios. 

• Pre-petition, more than 3 years old – may be discharged, considered unsecured general.
• Pre-petition, less than 3 years – cannot be discharged, priority claim unless secured by an NFTL. 
• Post-petition, pre-confirmation – may be discharged if included in the repayment plan, but will not be discharged if the plan doesn't include a date for filing an administrative expense claim or fails to include language about discharging unclaimed post-petition/pre-confirmation liabilities. (Note: rules may vary for sole proprietors, unless the estate was considered the employer at the time of the ESRP assessment.)
• Post-petition, post-confirmation – cannot be discharged. Cannot be included in bankruptcy plan. The IRS may file a motion to convert the case to Chapter 7 or dismiss it if these penalties are not paid on time. 

Chapter 13

In Chapter 13, you may discharge both pre- and post-petition ESRPs, but you can't discharge post-petition ESRPs unless the Chapter 13 plan was amended to include them. 

Pre-petition ESRPs can typically be discharged with a Chapter 13 hardship discharge, unless you committed willful evasion or didn't notify the IRS about the bankruptcy hearing. Cannot discharge post-petition ESRPs. 

CP220J and the ACA Penalty Process

CP220J comes after you've lost most appeal rights. It's the end of the ESRP assessment process, and the beginning of the collection process. The lead-up to this notice usually plays out like this:

• Forms 1094-C / 1095-C – 1095-C shows health coverage offered to individual employees, and 1094-C summarizes that information. The IRS uses these forms to check compliance with ACA requirements for ALEs. Failure to file leads to significant penalties, but mistakes or lack of compliance may lead to an ESRP assessment.
• Letter 226-J – This letter proposes ACA employer penalty against you, outlines how much you owe, and why. It also comes with response forms and outlines your appeal rights along with a deadline. 
• Forms 14764 and 14765 – These forms show how the penalty for employer responsibility was calculated, and it gives you a chance to dispute or agree with the calculations. You can agree with some parts of the proposed penalty, while disputing others. 
• Letters 227 – Letters in the 227 series explain the IRS's response to your ESRP appeal. These letters let you know if the IRS has maintained the original penalty, reduced it, or removed it based on your response to the proposed assessment. 

Finally, letter 220-J comes at the end of this process. You now owe the penalty. 

Why You Received a CP220J Notice

Not sure why you received this letter? It's the end of a long penalty assessment process, which includes multiple appeal options. CP220J doesn't usually come as a surprise, but if you've been ignoring mail, it may be quite a shock to open this letter. Typically, employers receive this letter after:

• Not responding to Letter 226-J – if you don't respond to the proposed assessment, the IRS will send Letter 5040-J. That gives you 15 days to respond, or the IRS will assess the penalty.
• Not responding to 227 series letters – The IRS responds to ESRP appeals and Form 1464 with letters from the 227 series. Typically, letters 227-J, L, M, N, and O indicate that you owe a penalty, while 227-K indicates that the penalty was reduced to zero. If you owe and don't respond, you'll receive CP220J next.
• Not appealing after Letters 227-L or M – Letters 227-L and M give you the right to appeal, and if you don't exercise that right by the deadline, the IRS will move forward with assessment. 
• Not requesting a judicial review after Letter 5917, Appeals Closing Letter – If you appealed the ESRP, Letter 5917 explains the results of the case and your right to a judicial review. You'll receive SP220J if you don't petition the courts. 

How a Tax Professional Can Help With CP220J

You need help – but dealing with a penalty of this size based on such specific laws requires the right expertise. TaxCure can help you find a licensed tax professional with ESRP penalty experience. Don't wait – start your search today. 

An experienced tax professional can help you:

• Request reconsideration to bring in new information and dispute the penalty.
• Seek a refund after paying the ESRP.
• Appeal claim disallowances with the IRS or in court. 
• Verify the accuracy of the penalty.
• Avoid ESRP assessments in the future.
• Set up payments or apply for relief options. 
• Advise you on discharging penalties or taxes in bankruptcy. 

Don't let the IRS come after you – involuntary collections put you, your business, and your personal finances at risk. Get help today using TaxCure. 

FAQs about CP220J 

Is CP220J the final ACA penalty notice for employers?

Yes, this is the final notice. The IRS uses CP220J to demand payment after charging an ESRP to your business. 

Can CP220J penalties be appealed?

Not at this point. Once you receive CP220J, you have no more appeal rights – unless you pay and request a refund or qualify for a reconsideration. Most of the letters that come before this notice give you appeal rights. 

Will the IRS file a lien if I don’t pay?

Absolutely, the IRS will file a tax lien against your business assets – and potentially personal assets, depending on the structure of your business. A lien automatically arises any time you owe tax or penalties to the IRS, and the agency generally files a Notice of Federal Tax Lien (NFTL), making the lien a public record if you owe over $10,000. 

Am I personally liable for the ESRP?

You are personally liable if you own a sole prop or a partnership that is not organized as an LLC. You may also be liable if you own an LLC or a corporation but you commingle assets or take other actions that allow the IRS to "pierce the corporation veil". 

Can ESRP penalties be included in a payment plan?

Yes, the IRS will allow you to include the ESRP in an installment agreement, provided you meet the other requirements to qualify for an agreement. 

How fast does interest grow on CP220J balances?

The IRS applies interest at a variable quarterly rate based on the Fed rate plus 3 points, or plus 5 points if a corporation owes over $100,000. It also compounds daily, making it more aggressive. Based on a 9% interest rate, a $100,000 ESRP penalty will accrue $9416 in interest in a year.