The IRS has announced a change of course regarding individual tax returns and ACA compliance. Individual tax returns filed in the 2018 filing season will not be accepted if the taxpayer does not indicate whether they had health coverage.
The IRS had previously planned to reject returns without the health coverage information during the 2017 filing season. They reversed course early in 2017 to respond to the Trump administration’s executive order to reduce administrative and regulatory burdens. This latest October 2017 announcement provides ample time for taxpayers and their tax advisors to prepare for this change.
The IRS is instructing taxpayers to indicate on their Forms 1040 whether they and everyone else on their return had minimum essential coverage, qualified for an exemption or whether they are making a payment for not having coverage.
The IRS statement on the reporting requirement and resources for tax professionals can be found here.
Taxpayers who fail to report whether they had coverage could face penalties for late filing due to the IRS not accepting a return. The IRS will not accept returns that omit the coverage information. As such, a person filing on April 17, 2018 who has their return rejected would be considered to be a late filer when they finally correct their omission. Note: The filing date for 2018 is shifted as April 15, 2018 is a Sunday and Monday is the Emancipation Day holiday in Washington, D.C.
Archived IRS tax tips note that there are eight (8) important points for filing or paying taxes late. Of note, both late filing and late payment penalties may apply in some situations. The maximum amount charged for the two (2) penalties in 2017 is five percent (5%) per month. IRS facts about late filing can be found here.
More information on the individual shared responsibility provision can be found on the IRS website here.