Any clients lacking health insurance should know that starting next tax-filing season the Internal Revenue Service will not accept electronically filed tax returns that do not indicate whether the taxpayer has health insurance coverage mandated by the Affordable Care Act.
“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,” the agency advised on its web page, “ACA Information Center for Tax Professionals.” (Most filers check a box on their return to verify coverage and submit a confirmation form, such as a 1095.)
This represents a reversal of policy by the IRS. After claiming that millions of nondependent taxpayers didn’t meet the above conditions in 2015 and following President Trump’s executive order rolling back parts of the ACA, the IRS said earlier this year that it would not reject tax returns that didn’t include health coverage information. The IRS also said it began sending reminder letters in September to some 130,000 taxpayers who didn’t address the health-care requirement on 2014 or 2015, or both, tax returns.
Returns filed on paper next year that don’t address the health coverage requirements may also be suspended pending the receipt of additional information and any refunds may be delayed.
“Most clients know that they need to get me the 1095A, B and C forms, and that if they get a premium tax credit we have to calculate whether they owe some back. Now the biggest misconception is that if they don’t report their insurance coverage on their return, they don’t owe the penalty for not having health insurance,” notes Brian Stoner, a CPA in Burbank, Calif. “I have to tell them they still owe any penalty or have to pay back any premium tax credit they were not entitled to.”
In previous tax seasons, the IRS delayed processing of tax returns that didn’t have the health care coverage box checked, but it didn’t prevent returns’ processing.
The fee for not having health insurance has been either a percentage of a taxpayer’s household income or a per-household-member charge.
Some kinds of coverage may also not constitute health insurance for return processing, including coverage consisting solely of stand-alone dental and vision insurance, accident or disability income insurance or workers' compensation; Medicaid providing only family planning services or only coverage limited to treatment of emergency medical conditions; and space available TRICARE coverage or line-of-duty TRICARE coverage, among others.
Your client can claim an exemption if he or she was uninsured for no more than two consecutive months of the year, is a member of a federally recognized tribe or eligible for services through an Indian Health Services provider or is a member of a recognized health care-sharing ministry, among others.
Advise your client, too, that tax preparers will verify health insurance or make the consequences clear. Alfred Giovetti, a CPA in Catonsville, Md., recently took an ACA seminar where one presenter called ACA compliance “insanely difficult.”