On Oct. 17, 2017, the IRS released a statement on its ACA Information Center for Tax Professionals webpage for the upcoming 2018 filing season regarding a change in reporting requirements on individual federal income tax returns (Form 1040). The IRS won’t accept electronically filed tax returns where the taxpayer doesn’t address the health coverage requirements of the ACA on line 61 (Health Care: Individual Responsibility). So, electronic tax returns must indicate whether the taxpayer had coverage, had an exemption or will make a shared responsibility payment. Additionally, paper returns that don’t address the health coverage requirements may be suspended pending the receipt of additional information, and any refunds may be delayed.
The 2018 filing season will be the first time the IRS won’t accept tax returns that omit this information. The IRS took a different stance for the 2017 filing season, which we discussed in our March 7, 2017, edition of Compliance Corner.
As background, the individual shared responsibility provision (i.e., the individual mandate) requires individuals to do at least one of the following:
- Have qualifying health coverage (called minimum essential coverage)
- Qualify for a health coverage exemption
- Make a shared responsibility payment for the months that the individual did not have coverage or an exemption
Some taxpayers will have qualifying health care coverage for all 12 months in the year and will be able to check the "full-year coverage" box on line 61 of their return. This year, the IRS has put in place system changes that will reject tax returns during processing in instances where the taxpayer doesn’t provide information related to health coverage (i.e., leaves the box unchecked).
As a reminder, the legislative provisions of the ACA are still in force until changed by Congress, and taxpayers remain required to follow the law and pay what they may owe. So, the IRS may still enforce the individual mandate, and Forms 1040 will be rejected at the time of filing. To avoid refund and processing delays when filing 2017 tax returns in 2018, taxpayers should indicate whether they and everyone on their return had coverage, qualified for an exemption from the coverage requirement or are making an individual shared responsibility payment.
When the IRS has questions about a tax return, taxpayers may receive follow-up questions and correspondence at a future date, after the filing process is completed, and taxpayers should work with individual tax advisors with respect to answering those questions and correspondence.
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Individual Shared Responsibility Provision Webpage »