2017.02.09 Important Update - Individual Shared Responsibility Payment (ACA)



2017.02.09 Important Update - Individual Shared Responsibility Payment

 

On February 15, 2017, the IRS released the following statement regarding the ISRP:

The IRS is currently reviewing the Jan. 20, 2017, executive order to determine the implications. Taxpayers should continue to file their tax returns as they normally would.

The individual shared responsibility provision requires you and each member of your family to do at least one of the following:

  • Have qualifying health coverage called minimum essential coverage
  • Qualify for a health coverage exemption
  • Make a shared responsibility payment with your federal income tax return for the months that you did not have coverage or an exemption.

Most taxpayers have qualifying health care coverage for all 12 months in the year, and will check the "Full-year coverage" box on their return.

This year, the IRS put in place system changes that would reject tax returns during processing in instances where the taxpayer didn’t provide information related to health coverage.

However, the Jan. 20, 2017, executive order directed federal agencies to exercise authority and discretion available to them to reduce potential burden.‎ Consistent with that, the IRS has decided to make changes that would continue to allow electronic and paper returns to be accepted for processing in instances where a taxpayer doesn’t indicate their coverage status.

However, 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. 

Processing silent returns means that taxpayer returns are not systemically rejected by the IRS at the time of filing, allowing the returns to be processed and minimizing burden on taxpayers, including those expecting a refund. When the IRS has questions about a tax return, taxpayers may receive follow-up questions and correspondence at a future date, after the filing process is completed. This is similar to how we handled this in previous years, and this reflects the normal IRS post-filing compliance procedures that we follow. 

See IRS article Individual Shared Responsibility Provision and the IRS website regarding the Affordable Care Act for more information. 

 

The following Broadcast email, from February 9, 2017, provided information about the change to Drake16 to accommodate e-filing of a return where question 61 will not be answered per the taxpayer's election. 

Important Update - Individual Shared Responsibility Payment

On February 3, IRS disabled business rules IND 069 and IND 070 and will now accept an e-filed return that does not indicate either full-year coverage or an individual shared responsibility payment or does not include an exemption on Form 8965, as required by IRS instructions, Form 1040, line 61.

In accordance with these changes, a software update has been released to enable taxpayers to elect to file a return with no response to line 61 of Form 1040. To indicate the taxpayer has elected to file the return with no response to line 61 of the 1040, mark one of the following checkboxes on the HC screen:

  • Taxpayer does not want to compute the Shared Responsibility Payment even though no one had minimum essential coverage.
  • Taxpayer does not want to compute the Shared Responsibility Payment even though someone didn't have minimum essential coverage.

Checking one of these boxes clears the health care coverage message pages.

IMPORTANT: Make sure the taxpayer understands that by selecting either of these check boxes, he or she could receive communication from the IRS, experience delayed refunds, and face subsequent collection activity to recoup the individual shared responsibility payment, if the payment applies to the taxpayer's filing scenario.

Drake16 update 30, released February 9, 2017, activated the relevant checkboxes on the HC screen: