The Affordable Care Act (ACA) remains the law of the land, so the IRS says there’s still a health insurance component to Tuesday’s deadline for filing taxes.
Beginning in 2014, the federal health law required almost all Americans to have health insurance or pay a tax penalty — a mandate for individuals that Republicans in Congress and President Donald Trump oppose, but have yet to eliminate.
For tax year 2016, the Internal Revenue Service had planned on rejecting tax returns when taxpayers didn’t provide information on whether they had health insurance, but changed course following an executive order from Trump earlier this year calling on agencies to remove administrative burdens.
Even with the change, the IRS says that taxpayers aren’t off the hook when it comes to “individual shared responsibility payments,” as the tax penalties are described by the agency.
“Legislative provisions of the ACA law are still in force until changed by the Congress, and taxpayers remain required to follow the law and pay what they may owe,” the IRS said in a statement Monday.
The ACA requires people to have qualifying health coverage, receive an exemption or make a payment. Most taxpayers have qualifying coverage for all 12 months of the year, the IRS says, so they simply check a box indicating full-year coverage on their returns.
During 2015, about 6.5 million taxpayers reported a total of $3 billion in payments, the IRS commissioner told Congress in January.
State-level data for 2015 is not yet available, but an IRS report shows that Minnesota taxpayers for 2014 filed 94,440 returns with more than $19 million worth of individual shared responsibility payments. Twenty of those Minnesota returns listed $1 million or more in adjusted gross income; as a group, those taxpayers paid $102,000 in tax penalties.
Each return reflects tax paid by one or more individuals, so it’s unclear how many people paid penalties for lacking coverage.
In 2014 and 2015, tax returns that were silent on the question of whether individuals had health insurance also were processed, the IRS says. Tax preparers say they let filers know that if they don’t indicate their health insurance status, that doesn’t mean the IRS won’t ask questions later.
“If they don’t check [the box] and don’t fill out the forms, it will not show a penalty on the return and the return will get accepted by the IRS,” said Lance Campbell, a certified public accountant with Hawkins Ash CPAs in Rochester. “But then … you may get something down the road if you leave it silent.”
Individual share responsibility payments are either a percentage of household income in excess of the return filing threshold or a flat dollar amount, the IRS says, whichever is greater. In 2016, the percentage is 2.5 percent; the flat amounts are $695 per adult and $347.50 per child up to a family maximum of $2,085.
Payment amounts are capped at the cost of the national average premium for a bronze level health plan available through government-run health insurance exchanges. For 2016, the annual national average premium for such a plan was $2,676 per year ($223 per month) for an individual and $13,380 per year ($1,115 per month) for a family with five or more members, according to IRS.