United States

ACA penalty on individuals without health insurance still applies

IRS will not reject Form 1040 for missing health insurance information

TAX ALERT  | 

On Feb. 15, 2017, the IRS announced that it will process 2016 individual tax returns that do not contain health insurance information instead of rejecting them during processing. The IRS also stated that the individual shared responsibility penalty for not having health insurance continues to apply.   

Background

Since 2014, individuals have been required to report on their Form 1040, U.S. Individual Income Tax Return, whether they have health insurance or qualify for an exemption from the shared responsibility payment imposed by the Affordable Care Act (ACA). However, tax returns were still processed by the IRS even if the returns were missing this information. If the IRS had questions about the return, it would send correspondence to the taxpayer at a later date after the return was processed.

For 2016 returns, the IRS had modified its system so that Form 1040 would be rejected during processing if it was missing health insurance information. However, the IRS re-evaluated this system change following the issuance of the executive order by President Trump on Jan. 20, 2017, which directed federal agencies to exercise authority and discretion to reduce potential burden from the ACA.

Current status

After reviewing President Trump’s executive order, the IRS decided to continue to allow 2016 electronic and paper returns to be processed without health insurance information. The IRS has indicated these returns will not be rejected by the IRS at the time of filing, but will be processed in order to minimize the burden on taxpayers and not delay refunds. If the IRS has questions about a return, the taxpayer will receive correspondence at a future date after the filing process is completed, as in prior years.

The IRS has reiterated that the ACA is still in force until changed by Congress, and that taxpayers are required to follow the law and pay any shared responsibility penalties owed.

See the IRS individual shared responsibility provision webpage for more information about this health insurance issue.

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