Failure to report health coverage will not cause tax return rejection

By Sally P. Schreiber, J.D.

The IRS announced that it will not reject tax returns just because a taxpayer has not indicated on the return whether the taxpayer had health insurance, was exempt, or made a shared-responsibility payment under Sec. 5000A. The IRS disclosed the change on its webpage, ACA Information Center for Tax Professionals, in response to President Donald Trump’s Jan. 20 executive order mandating that federal agencies reduce the burden of the Patient Protection and Affordable Care Act (PPACA), P.L. 111-148, on taxpayers.

Sec. 5000A, enacted as part of PPACA, requires taxpayers who do not maintain minimum essential health coverage for each month of the year and who do not qualify for an exemption to pay a shared-responsibility payment with the filing of their Form 1040, U.S. Individual Income Tax Return.

Although the health insurance information requirement for individual tax returns has been in effect for a few years, the IRS explained that in the past it has not rejected returns that did not contain the information. This year, it had put into place systems that were designed to reject returns that did not provide the information. As a result of the executive order, the IRS has suspended that practice and will allow returns without that information to be processed. The IRS also says it is studying the executive order to determine what other action it must take to comply.

As the IRS pointed out, the requirement for taxpayers to make shared-responsibility payments under PPACA if they do not have health insurance or an exemption is statutory and cannot be changed without legislation. Therefore, until legislation repealing the requirement is enacted, taxpayers who do not have insurance or an exemption must pay the shared-responsibility payment. The IRS suggested that, although it would process returns without the information or payments, it will nonetheless issue follow-up correspondence after it has completed processing the returns.

The IRS announcement came on the same day that the Department of Health and Human Services (HHS) issued a proposed rule (RIN 0938-AT14) that would, among other things, reduce the open enrollment period in the individual market on the Affordable Insurance Exchanges for the 2018 plan year (changing the closing date from Jan. 31, 2018, to Dec. 15, 2017); increase preenrollment verification of eligibility; and allow insurers to apply a premium payment to an individual’s debt for certain prior coverage. In the preamble to its proposed rules, HHS says the changes are designed to stabilize the individual and small group health insurance markets by helping the Affordable Insurance Exchanges attract and retain the “healthy consumers necessary to provide a stable risk pool that will support stable rates.”

Sally P. Schreiber ( is a JofA senior editor.

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