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IRS Posts Best Practices For Individual Mandate

The IRS has posted best practices for return preparers addressing the Affordable Care Act’s (ACA) individual shared responsibility requirement, also known as the individual mandate. The Service reminded preparers that the Tax Cuts and Jobs Act did not eliminate the individual shared responsibility requirement for 2017. The IRS has cautioned that it will not consider a 2017 return complete and accurate if the taxpayer does not report coverage, claim an exemption, or report a shared responsibility payment. In past years, the IRS processed these so-called “silent returns.”

Individual mandate

Individuals without minimum essential health coverage must make a shared responsibility payment, unless exempt. Individuals with employer-provided health insurance, Medicaid and Medicare, and certain other health insurance coverage, generally are treated as having minimum essential coverage. Some exemptions may be obtained from the ACA Marketplace. Other exemptions may be claimed on a taxpayer’s return. These exemptions include individuals who are members of federally recognized Native American Nations, individuals who are incarcerated, individuals with a short gap in coverage, certain hardships, and more. Individuals make a shared responsibility payment when they file their returns. The payment is a flat dollar amount or a percentage of income, whichever is greater.

Best practices

A client can show he or she had minimum essential coverage by a number of methods, the IRS explained. The ACA requires certain large employers to inform employees about their health coverage. Clients with coverage through the ACA Marketplace also receive notification. Individuals with government-provided coverage, such as Medicaid and Medicare, should have supporting documents. A client might not have proof of coverage, the IRS noted. In this case, the preparer should discuss the nature of the coverage including the months the client was covered to get a reasonable assurance so the preparer can accurately complete the tax return, the IRS explained.

Going forward

The Tax Cuts and Jobs Act effectively repealed the individual shared responsibility requirement by making any payment due $0. However, this change takes effect for months beginning after December 31, 2018. The individual shared responsibility requirement remains unchanged for 2017 and 2018.

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