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October 23, 2017

IRS will reject tax returns that don't include health coverage status

Daily Briefing

    IRS last week announced for the 2018 tax filing season it will not accept income tax returns that do not indicate whether an individual complied with the Affordable Care Act's (ACA) individual mandate by enrolling in health coverage.

    According to IRS, the 2018 filing season will mark the first time the agency will not accept tax returns without information on individuals' health insurance status.

    Background: Tax penalties under the ACA

    Under the ACA's individual mandate, most U.S. residents must be enrolled in a health plan or pay a penalty. Those who did not have health coverage in 2017 will have to pay $695 per adult or $347.50 per child, or 2.5 percent of a filer's adjusted gross household income—whichever is higher—when they file their 2017 taxes.

    Tax filers are required to indicate whether they had coverage for the year on line 61 of their 1040 tax forms. While IRS in the past has not rejected tax returns missing the coverage data, some tax filing software would not allow users to file their returns if the information was missing.

    IRS announces new policy for 2018 tax filing season

    IRS in a recent statement said for the 2018 filing season it "will not accept electronically filed tax returns" in which the filer does not indicate their health insurance status. IRS said such returns will not be accepted until the filer indicates whether they had coverage, qualified for an exemption to the individual mandate, or intend to pay an individual mandate penalty.

    In addition, IRS said tax returns filed on paper "may be suspended pending the receipt of additional information [regarding the filer's health insurance status] and any refunds may be delayed."

    IRS said after a review of its process and discussions with the National Taxpayer Advocate, the agency determined that "identifying omissions and requiring [filers] to provide health coverage information at the point of filing makes it easier for the taxpayer to successfully file a tax return and minimizes related refund delays."

    IRS said its new "process reflects the requirements of the ACA and [IRS'] obligation to administer the health care law" (Mangan, CNBC, 10/20; Phillips Erb, Forbes, 10/18; Leonard, Washington Examiner, 10/19).

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