IRS will not reject tax returns that don't include Obamacare disclosures

CMS announced a proposed rule designed to improve risk pools on health insurance exchanges

CMS announced a proposed rule designed to improve risk pools on health insurance exchanges

While the mandate requires individuals to have health insurance, the IRS's new policy makes enforcing the tax penalty more hard.

IRS says it made the decision, first reported by Reason , due to the president's executive order that directs agencies to ease any ACA-related burdens on taxpayers and companies.

The Internal Revenue Service is temporarily putting the brakes on issuing new rules while evaluating the impact of an executive order from President Trump, while scaling back enforcement of the individual mandate under the Affordable Care Act. The mandate remains the law and people are still supposed to pay a penalty for lacking coverage.

The IRS says it is now reviewing the executive order to determine its implications. In other words, the individual mandate is dead.

That mandated coverage can come from insurance through a job, Medicare, Medicaid, military programs, or from individual health plans like those sold on and outside of government-run Obamacare exchanges like HealthCare.gov.

It has not yet begun to reject tax forms which failed to indicate whether filers have health coverage or had paid the Obamacare penalty for going uninsured, but was scheduled to begin to do so in this year for 2016 tax returns.

How much difference does a single line on a tax form make? The IRS continued, "Consistent with that, the IRS has decided to make changes that would continue to allow electronic and paper returns to be accepted for processing in instances where a taxpayer doesn't indicate their coverage status". If the line was left empty, it was labeled a "silent return" and rejected. Previously, those without insurance would face a penalty of up to $695. or 2.5 percent of household income.

But the IRS added that the ACA's legislative provisions "are still in force until changed by Congress". While the agency only announced the new policy on Wednesday, Feb. 15, it says it started implementing it for all returns filed this year.

Although the IRS has stopped enforcing the tax form reporting requirement, the Affordable Care Act is still legislatively in effect and, according to a note from Drake Software, "taxpayers remain required to follow the law and pay what they may owe".

"Processing silent returns means that taxpayer returns are not systematically rejected, allowing them to be processed and minimizing burden on taxpayers, including those expecting a refund", the IRS told Reason. "This is similar to how we handled this in previous years, and this reflects the normal IRS post-filing compliance procedures that we follow".

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