IRS Posts Best Practices for Individual Mandate

The IRS has posted on its website updated best practices for return preparers addressing the Patient Protection and Affordable Care Act’s (ACA) (P.L. 111-148) individual shared responsibility requirement, also known as the individual mandate. The Service reminded preparers that the Tax Cuts and Jobs Act (P.L. 115-97) did not eliminate the individual shared responsibility requirement for 2017.

Comment. The IRS will not consider a 2017 return complete and accurate if the taxpayer does not report coverage, claim an exemption or report a shared responsibility payment. In the past, the IRS processed these so-called “silent returns.”

Individual Mandate

Nonexempt individuals without minimum essential health coverage must make a shared responsibility payment. Generally, individuals with employer-provided health insurance, Medicaid,  Medicare, and certain other health insurance coverage, have minimum essential coverage.

Comment. Taxpayers may obtain some exemptions from the ACA Marketplace. However, taxpayers may claim other exemptions on their return. Exemptions that may be claimed on a return include those for individuals:

  • who are members of federally-recognized Native American Nations;
  • who are incarcerated,
  • with a short gap in coverage; and
  • with certain hardships.

Individuals without coverage must make a shared responsibility payment when they file their return. The payment is the greater of a flat dollar amount or a percentage of income.

Best Practices

A client can show he or she had minimum essential coverage by a number of methods, the IRS explained. The ACA requires certain large employers to inform employees about their health coverage. Clients with coverage through the ACA Marketplace also receive notification. Individuals with government-provided coverage, such as Medicaid and Medicare, should have supporting documents.

A client may not have proof of coverage, the IRS noted. In this case, the preparer “should discuss the nature of the coverage including the months they were covered to get a reasonable assurance so the preparer can accurately complete the tax return,” the Service explained.

Repeal after 2018

The Tax Cuts and Jobs Act effectively repealed the individual shared responsibility requirement by making any payment due $0. However, this change takes effect after 2018. The individual shared responsibility requirement remains unchanged for 2017 and 2018.

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

Affordable Care Act – Individual Shared Responsibility Provision – §5000A

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