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IRS cites Trump’s order and accepts tax returns skipping Obamacare mandate

mdavis@kcstar.com

An executive order by President Donald Trump means the IRS will accept tax returns that fail to say whether the filer met the individual mandate under the Affordable Care Act.
An executive order by President Donald Trump means the IRS will accept tax returns that fail to say whether the filer met the individual mandate under the Affordable Care Act.

The IRS says it is giving filers a break on one line in this year’s tax returns, and President Donald Trump made them do it.

It’s the line required under the Affordable Care Act, widely known as Obamacare. It basically says check here to declare you had health care coverage for the full tax year.

Line 61 on form 1040. Line 38 on 1040A. Line 11 on 1040 EZ.

This is the individual shared responsibility provision of the Affordable Care Act. Checking the box shows you met the act’s individual mandate to have health care insurance.

Most filers would be able to check the box, either because they have health insurance through work, Medicare or a policy they purchased. Others would have to meet an exemption or pay a penalty.

Previously, the Internal Revenue Service stood ready to reject tax returns that skipped that line. Now, the IRS says it will let that slide and is citing Trump’s Jan. 20 executive order.

Trump’s order told federal agencies to do what they can to reduce potential burdens under the Affordable Care Act that his administration says it wants to repeal and replace.

President Donald Trump signs his first executive order in the Oval Office of the White House. Trump signed the confirmations of Defense Secretary James Mattis and Homeland Security Secretary John Kelly, and an executive order requiring federal age

“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,” an updated IRS notice on the individual mandate provision said.

The IRS changed its stand without official notice, leaving unclear when it changed its practice. One writer noted the change with a blog post on Valentine’s Day. It said the IRS had acted “earlier this month,” but it did not provide a date.

The IRS normally releases such decisions with some “fanfare” or at least an official notice, said Lisa L. Carlson, an attorney with Lockton Companies, the Kansas City-based insurance brokerage and employee benefits firm.

“They didn’t send anything like that,” Carlson said.

She said the IRS likely felt it could change its practice in part because of expectations that the penalty for not having coverage will be reduced to zero. The penalty is $695 for an adult without coverage for the 2016 tax year.

Carlson said the U.S. House of Representatives could reduce the penalty to zero on its own, independent of whether the Affordable Care Act is repealed.

In an advisory to clients, Carlson also wrote that this appears to be the first federal agency action under Trump’s Jan. 20 order.

At this point, filers still must comply with the Affordable Care Act, but that’s not being policed on their tax returns. The IRS said it reserves the right to follow up on returns that leave the health care coverage information blank.

Mark Davis: 816-234-4372, @mdkcstar

Diane Stafford: 816-234-4359, @kcstarstafford

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