No Health Insurance? No problem. Here’s what the IRS is Now Saying About Withholding Tax Refunds.

    Estimated reading time: 8 minutes

    If you’re one of the 29 million people in the United States worrying about receiving an IRS penalty for not having health insurance in this past year this is good news. So you can take a moment to wipe the sweat off your brow for now.

    The Trump Administration and the IRS are working to revamp the individual mandates under the Affordable Care Act (ACA). It seems these recent actions are in direct response to the executive order signed by Trump after his inauguration in January.

    Stone healthcare insignia

    The order requires federal agencies to minimize the economic and regulatory burdens of the ACA. As a result, the IRS will exercise its own authority to alleviate the mandate weight of the ACA per President Trump’s request.

    This new change overturns plans to withhold tax refunds this year from Americans who defy the ACA insurance requirement.

    The IRS made a public announcement last Wednesday that the processing of tax returns will remain as usual. Even for those missing the required insurance documentation. In the past, individuals without health insurance would receive penalties as high as $695 per adult and $347.50 per child under 18 under Obama’s ACA.

    Taxpayers report this information via Form 1040 during tax season to certify that family members had coverage during the year. If the section was left blank the IRS would consider it a ‘silent return’, which is a violation of the individual ACA mandate. Therefore, this resulted in the rejection of these returns. The new provision trumps previous policy by accepting the return even if this information is not provided.

    As a cautionary note, keep in mind these changes have are not set in stone until the decree of new law. For now, the IRS will not automatically reject silent returns, but the agency may eventually question them and assess a penalty.

    Until congress enacts a change, the legislative provisions of the ACA will remain in effect. The IRS statement does not alter taxpayers’ responsibility to obtain health insurance or pay penalties for not having it.

    The Health and Human Services (HHS) has been active while Republicans work to dismantle the ACA and the IRS works to change its tax procedures. Officials recently provided a response to the future reforms with a new proposal to help protect patients by stabilizing ACA marketplaces.

    The rule puts forward several policy and operational changes which affect pre-enrollment verification, guaranteed availability, network adequacy and more. The proposal was met with praise from the insurance industry, and strict disapproval from consumer advocates. The steps taken by the IRS and the HHS exhibit an immediate need to counterbalance the new administration’s adjustments to the 2010 law.

    These actions present drastic effects with ACA participation in the insurance marketplace. Humana made an announcement last week outlining the company’s plans to fully withdraw from the marketplaces by 2018.

    With growing uncertainty about the market’s future, Aetna has also signaled their intent to follow suit with its withdrawal from the marketplace in the coming year. As the foundation of the ACA continues to crumble, there is legitimate concern about an abrupt collapse of the insurance marketplace altogether, which would affect the 10 million people or so who are still covered under the ACA.

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    About the Author

    A company founder standing by Colorado's Front Range

    Tom Conradt

    Co-Founder, IRS Collections Defense Attorney

    Tom Conradt is the co-founder of Boxelder Consulting & Tax Relief, and has been practicing IRS Collections defense law for the past ten years. Graduating from the University of North Carolina at Chapel Hill, Tom is the lead IRS Collections Defense Attorney and heads the tax resolution department. Tom’s favorite part about working at Boxelder Consulting is hearing about the relief that clients experience after they sign up and start seeing immediate results on their case. Tom enjoys all the outdoor activities Colorado has to offer, including skiing, hiking and climbing. He is also looking forward to the return of indoor pickup basketball.

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