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IRS will reject 2017 returns that are silent on compliance with ACA individual mandate

At its online Affordable Care Act (ACA) Information Center for Tax Professionals, IRS has said it will not accept electronically filed tax year 2017 returns that are silent on whether the taxpayer has complied with the individual mandate provisions of the ACA. Returns won’t be treated as complete and accurate unless the taxpayer reports full-year coverage, claims a coverage exemption, or reports a shared responsibility payment on the tax return.

Background. Under its so-called shared responsibility or individual mandate provision, the ACA requires individuals to obtain qualifying minimum essential coverage (MEC), receive an exemption from the coverage requirement (e.g., on account of having household income below the return filing threshold), or pay a penalty. When they file their income tax returns, individuals are directed to indicate whether they had MEC for the year or qualify for an exemption. Those that neither had MEC for the year nor qualified for an exemption are to pay a shared responsibility payment (SRP). Tax returns that didn’t report a full-year MEC or an exemption, or pay an SRP, are referred to as “silent returns.”

Early in 2017, IRS announced that it would not reject returns for the 2016 tax year that are silent on whether the taxpayer has complied with the individual mandate provisions of the ACA (see Weekly Alert ¶  12  02/23/2017). IRS had previously said such “silent returns” would be rejected because it would not consider a return to be complete and accurate if the taxpayer did not report full year coverage, an exemption, or a payment.

The Tax Cuts and Jobs Act provides that for months beginning after Dec. 31, 2018, the amount of the individual shared responsibility payment is reduced to zero. (Code Sec. 5000A(c), as amended by Act Sec. 11081)

Strict policy for individual mandate compliance on 2017 returns. On its website, IRS says that for tax year 2017, it won’t consider an electronically filed return complete and accurate if the taxpayer does not report full-year coverage, claim a coverage exemption, or report an SRP on the tax return. Most taxpayers have qualifying health coverage for all 12 months in the year, and will check the “Full-year coverage” box on their tax return. Taxpayers who do not have full-year coverage should indicate whether they qualify for a coverage exemption or owe an SRP. IRS says this process reflects the requirements of the ACA and its obligation to administer the health care law.

The 2018 filing season is the first time IRS will not accept tax returns that omit this information (i.e., “silent returns”). IRS says that after a review of IRS’s process and discussions with the National Taxpayer Advocate, it determined that identifying omissions and requiring taxpayers to provide health coverage information at the point of filing makes it easier for the taxpayer to successfully file a tax return and minimizes related refund delays.

References: For the requirement that non-exempt individuals maintain minimum essential health coverage, see FTC 2d/FIN ¶  A-6401; United States Tax Reporter ¶  50,000A4.

IRS Statement on Health Care Reporting Requirement (IRS website).

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