IRS Will Not Reject Returns Failing to Report Health Coverage Status

CCH Tax Day Report

The IRS will continue to process individual returns that fail to indicate the taxpayer’s health coverage status under the Affordable Care Act (ACA) (P.L. 111-148), the Service has announced on its website. The IRS apparently had intended to reject these so-called “silent returns” this filing season.

The ACA generally requires individuals to have minimum essential health coverage or make a shared responsibility payment, unless exempt. Government coverage, such as Medicare and TRICARE, and most employer-sponsored coverage is minimum essential coverage. Coverage obtained through the ACA Health Insurance Marketplace also is minimum essential coverage.

Taxpayers indicate if they had minimum essential coverage for each month of the tax year by checking a box on their return. If a taxpayer did not have coverage and was not exempt, he or she is required to make a shared responsibility payment with the return. Some taxpayers have failed to indicate their coverage status on their returns, the IRS reported.

In 2016, National Taxpayer Advocate Nina Olson told Congress that the IRS planned to reject returns where the taxpayer did not report if he or she had minimum essential coverage, did not claim an exemption, or did not make a shared responsibility payment (TAXDAY, 2016/07/08, I.3). This change by the Service, according to Olson, was to be made during the 2017 filing season.

In the meantime, President Trump issued Executive Order 13765 (TAXDAY, 2017/01/24, W.1). The executive order relays that it is the policy of the Trump administration to seek “prompt repeal” of the ACA. President Trump instructed the heads of federal agencies “to waive, defer, grant exemptions from or delay the implementation of any provision or requirement of the ACA that would impose any cost, fee, tax, penalty, or regulatory burden on individuals.”

On its website, the IRS explained that it will allow electronic and paper returns to be accepted for processing when a taxpayer does not indicate his or her coverage status. “Processing silent returns means that returns are not systemically rejected by the IRS at the time of filing, allowing the returns to be processed and minimizing burden on taxpayers, including those expecting a refund,” the agency reported. The Service added that taxpayers may receive follow-up questions and correspondence at a future date, about their coverage status, after the filing process is completed. It also emphasized that its revised treatment does not change the underlying legislative provisions of the ACA that remain in force, including penalty payments, until changed by Congress

The IRS left open the question of whether it would revise other aspects of ACA compliance during this filing season. The announcement on processing silent returns began with the statement, without elaboration: “The IRS is currently reviewing the Jan. 20, 2017, executive order to determine the implications. Taxpayers should continue to file their tax returns as they normally would.”

By George Jones and George L. Yaksick, Jr., Wolters Kluwer News Staff

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