What This Letter Means

Letter 5698 goes to employers. It is the follow-up to Letter 5699, which asked why the IRS has no Forms 1094-C and 1095-C on file for a year when its records suggest the employer was an applicable large employer. An applicable large employer generally had 50 or more full-time employees, counting full-time equivalents.

Under IRS procedures, Letter 5698 is issued when the employer did not respond to Letter 5699 within the time allowed. If you never saw the Letter 5699, this is your chance to answer now.

What Happens If You Ignore It

If there is no response to Letter 5698, the case goes to an examiner to consider penalties for failure to file the information returns and failure to furnish statements to employees. The examiner may try to call first if the IRS has a phone number for the business. A proposed penalty comes with Letter 5005-A and Form 886-A explaining the facts, law, and conclusion.

How to Respond

Follow the instructions in the letter and answer the question it asks. IRS examiners work responses based on what you tell them:

  • Filed under a different EIN. Give the name, EIN, and date the forms were filed. The forms must carry your own name and EIN, even when a parent company, related company, or payroll provider filed them for you.
  • Should have filed but didn't. Send the missing forms or explain when they will be filed electronically, and say why they were late. The examiner uses the reason to decide whether penalties apply.
  • Not an applicable large employer. Say so and back it up with your employee counts. If you give no explanation, the examiner will contact you to ask why.

If the IRS verifies your answer, it closes the case and sends Letter 5840.

Why It Matters

This is a filing compliance case now. Answered well, it can close without penalties. Ignored, it moves to a penalty case.

If your business received Letter 5698 and needs help with the response, call us at (813) 229-7100.