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The IRS has stated that it will not automatically reject Forms 1040 that fail to indicate whether the taxpayer has complied with the Affordable Care Act's "individual mandate" health coverage requirement during the 2016 tax year. This statement responds to President Trump's January 20th Executive Order and was posted on the IRS's official website. Although Forms 1040 will not automatically be rejected if the required information is not included, taxpayers continue to have a legal obligation to comply with the health coverage requirements.

Background

The individual shared responsibility provisions (individual mandate) of the Affordable Care Act (ACA) found in Code Section 5000A provide that every taxpayer and taxpayer's family member must maintain minimum essential coverage or qualify for a health coverage exemption. Failure to maintain minimum essential coverage or to qualify for an exemption may result in the imposition of an additional tax.

IRS rules require taxpayers to report on Line 61 of Form 1040 whether they and their family members have complied with the individual mandate by either checking the "full-year coverage box" or by indicating during which months they did not maintain coverage or qualify for an exemption. Taxpayers who fail to comply with the health coverage requirement during any month of the tax year may be required to make an additional payment with their federal tax returns and report the amount on Line 61 of Form 1040.

The IRS planned to introduce system changes for the 2016 tax year that would reject Forms 1040 that did not indicate the taxpayer's compliance with the ACA health coverage requirement.

IRS statement that it will continue to accept Forms 1040

On January 20, 2017, President Trump signed the "Executive Order Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal," in which the Administration directed federal agencies, including the Department of the Treasury, to "exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a … cost, fee, tax, penalty, or regulatory burden on individuals, families," etc. (See Tax Alert 2017-142.)

In response to the Executive Order, the IRS posted a statement on its website saying it would continue to accept Forms 1040 that fail to indicate whether the taxpayer and the taxpayer's family have complied with the health coverage requirement. This process is consistent with the process that applied in previous reporting years in which the IRS accepted Forms 1040 with incomplete Line 61 information.

The IRS statement emphasizes that the ACA is still in force and that taxpayers must continue to follow its requirements and pay the taxes they owe.

Implications

Taxpayers continue to have a legal obligation to comply with the ACA health coverage requirement and file their Forms 1040 in accordance with the IRS guidance. Although a taxpayer's Form 1040 return will not be automatically rejected if the form does not include the health coverage information, the IRS may issue follow-up correspondence to the taxpayer regarding the lack of information after the filing process is complete.

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