ACA Update: IRS Tweak to Individual Reporting – What It Means

Employers are still required to file their ACA reporting forms. Beyond a potential extension of “good faith” relief to Tax Year 2017 filings, there will likely not be any IRS changes to employers’ reporting obligations.

The IRS has implemented its first regulatory change in response to President Trump’s executive order. The narrow rule change, which was published to the IRS’s Affordable Care Act Webpage, eases the burden on individual filers by accepting electronic filings that fail to indicate coverage status on Line 61 of Form 1040. The relevant instructions for the Individual Shared Responsibility provision provide the following:

“This year, the IRS put in place system changes that would reject tax returns during processing in instances where the taxpayer didn’t provide information related to health coverage. However, the Jan. 20, 2017, executive order directed federal agencies to exercise authority and discretion available to them to reduce potential burden.‎

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. However, legislative provisions of the ACA law are still in force until changed by the Congress, and taxpayers remain required to follow the law and pay what they may owe‎.”

Two crucial points regarding this development should be underscored:

  1. This only applies to Individual (Form 1040) filers – it does not affect filing by employers.
  2. This is not a repeal of the Individual Mandate – penalty provisions are still in place and are currently being enforced.

The IRS may still eventually audit and assess penalties to those who fail to provide coverage information. The IRS explicitly stated the ACA is still in effect until Congress says otherwise, so taxpayers will continue to incur penalties for noncompliance. As a result, the requirements for Line 61 are no longer any different than what they were for Tax Year 2015 filings – during which time filers were permitted to leave Line 61 blank but still incurred penalties for failure to obtain coverage.

Despite this change, employers are still required to file their ACA reporting forms.  Those forms will be rejected if they do not contain the requisite information. Because the President has indicated that we may not see a repeal until 2018, employers will still be required to operate their health plans in an ACA-compliant manner until notified otherwise.

In the context of the employer mandate, waiver of penalties seems unlikely because these penalties are written into law and are a significant source of revenue for the federal government. Beyond a potential extension of “good faith” relief to Tax Year 2017 filings (note: IRS has not yet indicated any intention to extend), there will not likely be any IRS changes to employers’ reporting obligations pursuant to the President’s Executive Order.

The bottom line: Those who are responsible for issuing and filing 1094s and 1095s on behalf of their organizations should continue to comply with all relevant laws, regulations, reporting requirements and filing specifications during the “repeal and replace” process.


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Read more about recent ACA regulatory updates on our blog: 

The post ACA Update: IRS Tweak to Individual Reporting – What It Means appeared first on Sovos Compliance.

About the Author

Tom Hospod

Tom Hospod is a member of the Tax Research Team for the Direct Tax division at Sovos Compliance, where his main areas of focus are Tax Withholding and Automatic Exchange of Information (AEOI). Prior to Sovos, Tom worked as a legislative aide in the Massachusetts House of Representatives. He also has experience in securities law—focusing on broker-dealer disputes and representing clients in FINRA arbitration. Tom is a member of the Massachusetts Bar, earned his B.A. from Boston College and his J.D. from the University of Miami.

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