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Pursuant to Executive Order, IRS Won't Reject Returns That Don't Provide Health Insurance Information

(Parker Tax Publishing March 2017)

Recent IRS changes to the system of processing returns meant that 2016 Forms 1040 that did not provide information about the taxpayer's health insurance coverage would be rejected for processing. However, as a result of a January 20, 2017, Executive Order relating to the Affordable Care Act, the IRS has changed its tax return processing procedures and will not reject any Forms 1040 that do not provide information regarding a taxpayer's health insurance coverage. IRS Website.

The instruction for Form 1040, Line 61, address the Affordable Care Act (ACA) and requires individuals to indicate on their 2016 Form 1040 filing whether they had health insurance, an exemption from coverage, or made a shared responsibility payment. In recent years, tax returns silent in that regard were still processed. For 2016 returns, the IRS had made system changes that would reject tax returns during processing in instances where the taxpayer didn't provide health insurance coverage information.

A January 20, 2017, Executive Order directed federal agencies to exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the ACA that would impose a fiscal burden on any state or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications. As a result, the IRS announced changes to its return processing system that will allow electronic and paper returns to continue to be accepted for processing in instances where a taxpayer doesn't indicate his or her health insurance coverage status.

However, the IRS noted that legislative provisions of the ACA law are still in force until changed by Congress, and taxpayers are still required to follow the law and pay what they may owe.

Processing returns that don't include the required health insurance information on Line 61 means that taxpayer returns will not be systemically rejected by the IRS at the time of filing. According to the IRS, this will allow the returns to be processed and will minimize burdens 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 the IRS handled this in previous years, the IRS statement said, and reflects the normal IRS post-filing compliance procedures followed by the IRS.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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