The IRS just quietly dropped a bombshell involving the Affordable Care Act (ACA) — and the move could ultimately impact the long-term future of the law.
In fact, the agency recently announced it will be accepting individuals’ tax returns regardless of whether those taxpayers filled out the line on the tax returns indicating whether they had maintained qualifying health coverage for the 2016 plan year.
Specifically, with very few exceptions, individuals were required to indicate whether they had maintained coverage in 2016 or paid the penalty by filling out line 61 on their Form 1040s. And the IRS previously said if line 61 wasn’t completed, it would label the 1040 a “silent return” and reject it.
Now, however, the IRS appears to have had a change of heart and said the line will be optional for 2016 tax filers.
‘Authority to reduce potential burden’
Why the about-face? Trump’s executive order on the ACA seems to have been the direct cause of the change in enforcement.
In a statement to Reason, IRS said:
“The recent 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 process in instances where a taxpayer doesn’t indicate their coverage status.”
As employers know, the requirement that all Americans maintain qualifying health coverage — aka the individual mandate — is one of the cornerstones of the ACA.
What about the employer mandate?
So that begs the question: If the feds are relaxing the enforcement of the individual mandate, will they do the same with employers’ ACA reporting requirements?
As of right now, the answer is “no.” But we’re following ACA developments very closely, and we’ll keep you posted.
In the meantime, employers should be putting the finishing touches on one part of their ACA reporting, as the bulk of deadlines are right around the corner.
In Notice 2016-70, the agency just extended one of the key deadlines for 2016 ACA reporting.
Specifically, the IRS pushed back the date by which employers have to provide individuals with 2016 Forms 1095-B and 1095-C from Jan. 31, 2017, until March 2, 2017.
As employers are well aware, these ACA reporting forms provide individuals with information about employers’ offers of healthcare coverage as well as details on the coverage provided.
The IRS also extended the good faith penalty relief to the 2016 information-reporting process as well. Earlier this year, the feds said employers would have to show “reasonable cause” to have penalties waived by the feds for 2016 reporting. So this represents a change to that stance.
That’s good news considering the reporting process is tricky enough, and the 2016 reporting forms include some notable differences.
One major example: New spousal coverage indicator codes. The 2016 forms include two new indicator codes – 1J and 1K – on Part II, Line 14 of Form 1095-C.
The two new codes will indicate conditional offers of health care to spouses. A conditional offer to a spouse occurs when a coverage offering is subject to one or more “reasonable” conditions.
Some examples of conditional offers:
- Spouse must certify he or she isn’t eligible for group health coverage through his or her employer, or
- Spouse must certify he or she is not eligible for Medicare.
While the IRS did extend the deadline for furnishing ACA reports to individuals, it hasn’t changed the deadline for getting the reporting info to the feds.
That means the deadline for filing 2016 Forms 1094-B, 1095-B, 1094-B and 1095-C with IRS will remain February 28, 2017, for paper forms and March 31, 2017, for electronic filing.
The IRS also didn’t change anything about the automatic filing extensions some employers can receive; those are still available right now.
