The Internal Revenue Service (IRS) has announced that it will accept so-called “silent” tax returns, that is, returns that do not answer the question about health coverage. This decision does not repeal the mandate that individuals have health benefits or the penalty provisions, which are still in effect.
The House of Representatives will be voting this week on a bill that would retroactively repeal the penalty for 2016 and later. The IRS says it still maintains the option follow up with taxpayers who elect not to complete line 61 on the Form 1040. It is not clear what, if anything, might prompt a follow up by the IRS.
This move by the Trump Administration is the first step intended to make tax compliance with health care reform less burdensome. This change by the IRS is in response to President Trump’s executive order directing federal agencies to reduce potential burdens on taxpayers.
Under the Affordable Care Act (ACA), taxpayers may owe what is formally known as an individual shared responsibility payment if they did not have qualifying health care coverage for every month of 2016. The ACA instructs individual taxpayers to indicate on their Form 1040 whether they had health insurance or an exemption from coverage; otherwise, they should make a shared responsibility payment.
It is not clear whether individuals who have already filed returns and made payments can amend their returns. It is even possible the IRS might automatically reduce a person’s tax liability by the amount already paid.
This announcement has no effect on employer reporting requirements.