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IRS to Require Taxpayers to Show Health Coverage

Oct 27th 2017
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For the first time, the IRS will require taxpayers filing returns in 2018 to indicate if they had health coverage under the Affordable Care Act (ACA).

The agency recently announced the change and indicated it won’t accept electronically filed tax returns that omit the information. Returns filed on paper may be suspended pending the IRS’ receipt of the health coverage information.

The above link includes information for tax professionals on how to handle the issue with individual, business and payroll clients, and offers information on general resources and the ACA.

In its announcement about the change, the IRS stated that it had reviewed and discussed its process with National Taxpayer Advocate Nina Olson. “This process reflects the requirements of the ACA and the IRS’ obligation to administer the health care law,” the agency says in its announcement.

Taxpayers should indicate if they and anyone else on their tax return had health coverage, qualified for an exemption from the coverage requirement or are making an individual shared responsibility payment.

For any month that taxpayers or members of their family didn’t have minimum essential coverage must claim or report a coverage exemption or make a shared responsibility payment on their returns, the IRS states.

However, taxpayers may be exempt from the requirement for minimum essential coverage if they meet certain criteria nor will they have to make a shared responsibility payment. Instead, they’ll file Form 8965, Health Coverage Exemptions, with their federal return.

President Trump issued an executive order directing the government to limit burdens imposed by the ACA, pending repeal. In answer to that order, the IRS said it wouldn’t enforce the health care reporting information on 2016 returns filed in 2017. Taxpayers, though, still had to pay the shared-responsibility portion if they didn’t have coverage or qualify for an exemption.

Editor’s Note: This is a fairly hot-button issue and we believe it deserves some discussion from the accounting community. Feel free to share your thoughts on it and how it may impact your clients as well.

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