The approval of tax reform legislation by Congress may ultimately have an impact on the Affordable Care Act (ACA) in 2019. That’s when the legislation essentially repeals the individual mandate provision of the ACA by making the tax penalty $0 for any American who does not obtain health insurance.
Until then, expect the IRS is moving forward with its efforts to enforce compliance with the ACA for the individual mandate. There is no change with respect to the employer mandate. The IRS has been and will continue to enforce it.
With the individual mandate in effect for the 2017 tax year, the IRS has updated information on its website for the 2017 tax year regarding the ACA’s individual mandate. For the 2018 tax filing season, the IRS says it will not consider a return complete and accurate if the taxpayer does not report full-year coverage, claim a coverage exemption, or report a shared responsibility payment on the tax return. The IRS stated that 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 will indicate whether they qualify for a coverage exemption or owe a shared responsibility payment. This is a change from past filing seasons, when the agency accepted tax returns without this information.
More information from the IRS on the individual mandate can be found by clicking here.
The IRS has issued guidance on how taxpayers can calculate the affordability exemption for the ACA’s individual mandate. The guidance addresses the challenges for individuals who live in areas where no bronze level plans are available in the healthcare marketplace for 2017.
In regards to the employer mandate, the IRS has started sending IRS Letter 226J tax penalty notices containing ACA penalty assessments for ACA information filings for the 2015 tax year. Some of these IRS Letter 226J notices contained penalties in the millions of dollars. More are expected to be issued in 2018, including for 2016 tax year filings.
For an infographic on how to respond to Letter 226J penalty notices, click here.
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