What Is IRS Letter 5699?
IRS Letter 5699 is formally titled "Missing Information Return Form 1094/1095-C." Despite the alarming experience of receiving correspondence from the IRS, it is not a penalty notice and it is not a bill. It is the IRS's opening move in what may become a formal enforcement action — a written inquiry asking your organization to explain why ACA reporting appears to be missing or inconsistent.
Under IRC Section 6056, applicable large employers are required to file Form 1094-C with the IRS and furnish Form 1095-C to each full-time employee annually. When the IRS has reason to believe those filings were never made, were incomplete, or don't reconcile with other data the agency already has on file, Letter 5699 is how it starts asking questions.
Not sure whether your organization is even an applicable large employer? Our ALE Determination article explains exactly how the IRS calculates ALE status — and why many employers get the math wrong.
Letter 5699 is an inquiry, not an assessment. No penalty has been formally proposed at this stage. What you do in response — and how quickly — largely determines what happens next.
Why Are Employers Receiving Letter 5699 for Tax Year 2024?
ACA compliance vendors are reporting that Letter 5699 notices for tax year 2024 are actively being delivered to employers across the country. This is not a formal IRS announcement of a new enforcement campaign — the IRS rarely telegraphs its selection activity that way. But the practitioner-level signals are consistent and credible enough that any applicable large employer with filing gaps should treat this as an active risk, not a theoretical one.
ACA enforcement has never gone away, but the IRS's infrastructure for identifying non-filers has matured significantly over the past decade. Employers who assumed that a quiet year meant no exposure are finding out otherwise.
The absence of a prior Letter 5699 does not mean your filings have passed review. The IRS works these cases on a rolling basis and is actively processing multiple tax years simultaneously.
How the IRS Identifies Letter 5699 Targets
The IRS identifies Letter 5699 targets by cross-referencing W-2 filings against its ACA reporting database. EINs where W-2 volume suggests ALE status but no corresponding 1094-C filing exists in the system get flagged automatically.
The most common triggers: no 1094-C or 1095-C on file; incomplete filing; transmission failures — filings submitted but never successfully received by the AIR system; FEIN mismatches; and W-2 volume suggesting ALE status with no ACA filing to match.
Our ACA Filing Transmission article explains the difference between a submitted filing and an accepted filing — and why "we filed" is not the same as "the IRS received it."
Effective for filings due in 2024 and beyond, employers filing 10 or more information returns of any type are required to file electronically through AIRS. Paper submissions above that threshold may trigger separate penalties under IRC 6721 — even if the forms themselves were accurate.
The Four Response Options on Letter 5699
Option 1: You filed, but under a different EIN. If your 1094-C and 1095-C were filed under a related entity's EIN, the IRS needs to know where to look. Be prepared to provide the name, EIN, and filing date.
Option 2: You should have filed but didn't. The letter asks you to either submit the delinquent returns or provide a timeline for electronic submission. Late filing is significantly better than non-response.
Option 3: You were not an ALE. Document your ALE determination with average monthly employee calculations. A statement of belief is not sufficient. The ACA ALE Determination and Compliance Guide includes the calculation worksheets and documentation checklist you need.
Option 4: Other. Use this carefully and document your explanation thoroughly.
Do not respond to Letter 5699 informally, verbally, or without documentation. An unsupported assertion without accompanying evidence is unlikely to close the inquiry and may invite further scrutiny.
What Happens If You Don't Respond — The Escalation Ladder
| Stage | IRS Notice | What It Means |
|---|---|---|
| 1 | Letter 5699 | Initial inquiry — filing appears missing. Response window typically 30 days. |
| 2 | Letter 5698 | Second inquiry issued when no response to 5699 is received. |
| 3 | Penalty case file opened | Examiner attempts phone contact. If unsuccessful, proceeds to penalty assessment. |
| 4 | Letter 5005-A | Formal penalty assessment under IRC 6721/6722 for failure to file or furnish. |
| 5 | Letter 972CG / CP215 | Penalty bill and demand for payment. |
| 6 | CP504B / Notice of Intent to Levy | IRS signals intent to seize assets. |
Most Letter 5699 notices give employers 30 days to respond. Extensions must be requested in writing before the deadline passes — not after. The 90-day minimum under Public Law 118-168 applies to Letter 226-J proposed ESRP assessments — not to Letter 5699.
If Letter 5699 Leads to Letter 226-J: Understanding How the IRS Calculates Your Penalty
Letter 5699 addresses the filing compliance question. Letter 226-J addresses the Employer Shared Responsibility Payment (ESRP) question — did you offer compliant, affordable coverage to your full-time workforce?
| Tax Year | 4980H(a) Annual | 4980H(a) Monthly | 4980H(b) Annual | 4980H(b) Monthly |
|---|---|---|---|---|
| 2023 | $2,880 | $240.00 | $4,320 | $360.00 |
| 2024 | $2,970 | $247.50 | $4,460 | $371.67 |
| 2025 | $2,900 | $241.67 | $4,350 | $362.50 |
| 2026 | $3,340 | $278.33 | $5,010 | $417.50 |
Sources: Rev. Proc. 2024-14 (2025 amounts); Rev. Proc. 2025-26 (2026 amounts)
For a full breakdown of how 226-J works, see our IRS Letter 226-J article and the PenaltyShield 226-J Response Guide.
For post-2024 proposed assessments, the Employer Reporting Improvement Act (Public Law 118-168) requires the IRS to allow at least 90 days to respond. Always calendar the response date printed on the letter. Missing the deadline results in automatic assessment.
What a Good Response to Letter 5699 Actually Looks Like
If you filed and have proof: Your response should include your EIN, the tax year, a clear statement that you filed, and documentation of successful AIRS transmission — specifically a confirmation receipt or acknowledgement file. The ACA Filing Transmission Audit Checklist includes a proof-of-filing verification framework covering Production Receipt IDs, acknowledgement status, and correction records.
If you filed but cannot confirm receipt: Address the discrepancy and, if necessary, arrange for corrected or late electronic filing.
If you were not an ALE: Document your ALE determination with average monthly employee calculations for the tax year in question.
If you didn't file and need to: Submit the delinquent returns with your response or provide a documented timeline. Include an explanation supporting a reasonable cause argument if one applies.
Free Download: 226-J Response Guide
If Letter 5699 leads to a 226-J, you'll need to respond fast and with documentation. Our practitioner-grade 226-J Response Guide covers the arguments that work, the documentation you need, and the deadlines you can't miss.
Download the Free Guide →The Bigger Picture: ACA Enforcement Is Not Slowing Down
The IRS has spent years building the data infrastructure needed to cross-reference employer filing data against ACA reporting at scale. That infrastructure is mature. The matching process is largely automated. And the practitioner community is reporting that 2024 tax year notices are already moving.
The employers most at risk are not necessarily the ones who ignored the ACA entirely. They are the ones who filed late, filed incompletely, relied on a vendor without verifying transmission, or whose 1094-C data contains gaps that don't survive scrutiny.
The ACA Audit Readiness article covers how to organize your ACA records before enforcement begins.
Received Letter 5699 — or not confident your ACA filings would survive scrutiny?
Start with our free practitioner guides:
Key Takeaways
- IRS Letter 5699 is a preliminary inquiry — not a penalty notice. It asks why ACA reporting appears to be missing or inconsistent.
- ACA compliance vendors are reporting active Letter 5699 issuance for tax year 2024. Employers with filing gaps should treat this as a current, active risk.
- The IRS identifies Letter 5699 targets by cross-referencing W-2 filing data against AIRS to flag EINs where ALE status is suggested but no 1094-C filing exists.
- Letter 5699 gives employers four specific response options. Each requires documentation — not just a statement.
- Failure to respond triggers a defined escalation sequence ending in formal penalty assessment and potential levy action.
- Letter 5699 and Letter 226-J are separate enforcement tracks. The 226-J ESRP penalty is calculated from your own 1094-C reported data.
- 2024 ESRP penalty rates: 4980H(a) is $2,970 annually / $247.50 monthly. 4980H(b) is $4,460 annually / $371.67 monthly. Always verify the rate for the specific tax year on your letter.
- The response window for Letter 5699 is typically 30 days. Extensions must be requested in writing before the deadline — not after.
If you've received IRS Letter 5699, the clock is already running.
PenaltyShield provides fully managed ACA penalty defense for applicable large employers. We review your filing record, reconstruct your compliance position, and prepare a substantiated response — before a preliminary inquiry becomes a formal assessment.