The IRS Won’t Reject Returns Without Healthcare Reporting, But You May Be Penalized
As we settle into the heart of tax season, the IRS has some new updates regarding how healthcare is reported on tax returns. The Affordable Care Act mandates individuals to have minimum essential coverage or run the risk of paying a penalty. Information on their healthcare is reported on their tax returns, indicating every month their status of healthcare coverage. There is either an acknowledgment of minimum essential coverage, claim of an exemption, or face a shared responsibility payment (which is the penalty for having no coverage).
Earlier this year, the IRS had put into place its plan to reject any tax returns that did not reflect health coverage. Since the issuance of Trump’sJanuary 20, 2017 executive order, the IRS is allowing taxpayers to report their tax information sans reporting of healthcare. In fact, many taxpayers have already filed their returns without this information.
In their announcement on the IRS website, the IRS specified that: “Processing silent returns means that returns are not systematically 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.” However, taxpayers who file “silent returns” won’t get off that easily.
At a later date, the IRS may send an inquiry letter, following up on the information for healthcare reporting. If that information is not provided or the taxpayer did not in fact have coverage for the tax year, the penalties may be imposed. Despite President Trump’s call to action for an ACA repeal, which would include alleviating all ACA-related taxes and penalties, the wheels are not yet in motion. A word to the wise: despite some leeway this tax season, report your healthcare information with your tax return to prevent headaches and penalties down the road.
To learn more about ACA compliance in 2021, click here.
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