The first batch of employers are getting estimates from the IRS of penalties they owe for not providing health coverage to employees in 2015. Some of the estimates are in the millions.

But that’s not the end of the matter. The penalties are just estimates and they might not be the actual amounts employers end up paying. Part of this is because the Internal Revenue Service will show some leniency given that both the agency and employers are still getting used to the new record-keeping requirements that might have some glitches.

The letters aren’t a “notice and demand for payment,” attorney Joanna C. Kerpen told Bloomberg Law. Employers that receive them must respond in 30 days, even if just to ask for an extension.

“The IRS is giving employers the opportunity to challenge these and disagree,” said Kerpen, a partner with Winston & Strawn LLP in Washington. Her practice focuses on employee benefits tax and law issues.

2015 was the first year employers had to report to the IRS about coverage under the Affordable Care Act. Companies with 100 or more employees were required to tell the IRS in the spring of 2016 whether they had offered minimum essential coverage to full-time workers in 2015. The IRS is just now getting around to sending out the letters estimating penalties for 2015.

Hi, It’s the IRS, Here’s Your 226-J

The IRS wouldn’t say how many “226-J” letters have gone out or who’s getting them, when contacted by Bloomberg Law.

But some practitioners expect Industries like trucking, restaurant, and staffing to see a high proportion of them. That’s because there is a high turnover rate inherent in those industries, which makes it challenging to keep track of workers, Alden J. Bianchi, a member at Mintz, Levin, Cohn, Ferris, Glovsky & Popeo PC in Boston, told Bloomberg Law.

Bianchi said about three-fourths of the letters he’s seen are for employers in these areas.

These industries often didn’t offer “broad-based coverage” before the ACA became law and struggled to secure coverage for employees after it went into effect. Some employers also “didn’t get the memo, or didn’t comply” with ACA requirements, which is why they’re seeing letters with large assessments now, he said.

We Owe How Much?

For 2015, employers with at least 100 full-time employees were required to offer affordable minimum essential coverage to at least 70 percent of full-time employees. If that didn’t happen, employers could face a penalty of $2,080 for every full-time employee.

Penalties for failing to provide minimum essential coverage to full-time employees can be pretty steep, sometimes going to $10 million, Bianchi said.

The amounts can be “eye-popping,” Nicole M. Elliott, partner with Holland & Knight LLP in Washington, told Bloomberg Law. Elliott previously served as senior director of operations for the ACA with the IRS.

In some cases, “if these penalties stick, they are an existential threat to the companies,” Bianchi said.

The IRS has been fair and responsive to employers seeking to correct their forms and possibly reduce their penalties, several practitioners told Bloomberg Law.

Potential for Error: High on Both Sides

Many of the high assessments are a result of filing errors, something that employers expressed concerns about in the years leading up to 2015.

“It may be that a number of employers misunderstood the filing requirements, but they still needed to get reports in,” resulting in errors, Edward I. Leeds, counsel with Ballard Spahr LLP in Philadelphia, told Bloomberg Law. Leeds’ practice focuses on health and welfare plans.

And the IRS may have made some errors, as well, given this is the first year its ACA filing system was up and running, Rachel Lesier Levy, a principal at Groom Law Group, told Bloomberg Law. Levy served as associate benefits tax counsel in the Treasury Department’s Office of Tax Policy with a focus on Obamacare implementation.

Re-Dotting the I’s

Some employers are seeing high penalties because they incorrectly filed their forms detailing an employer’s health insurance offer of coverage, Ryan Moulder, partner at Health Care Attorneys P.C. in Los Angeles. These employers either forgot to check the box asking if they provided minimum essential coverage, or they accidentally checked “no,” he said.

Since the letters are for three years ago, employers need to be sure they’re keeping all of their records to ensure their reporting was accurate.

After receiving a letter, an employer needs to go back and check its records to see if the employee it didn’t offer coverage to was actually a full-time employee and also to make sure the codes reported to the IRS on the forms were accurate, Elliott said. Employers that discover errors need to tell the IRS about the problems they had and get the penalties corrected.

The initial letters can be jarring. But most employers could see their penalties go down after correspondence with the IRS. Moulder said he has a “high confidence level” in all penalty appeals he’s sent to IRS.

Levy agreed that penalty assessments are likely to be lowered.

“I have yet to hear from any employer whose assessment has not been lowered,” she said.