February 21, 2017
By Samuel Winikoff*
The Internal Revenue Service (IRS) is temporarily halting the implementation of new income tax return processing measures while it evaluates the impact of a recent executive order. Issued on President Trump’s first day in office, Executive Order 13765 (82 Fed. Reg. 8351), “Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal,” seeks to curtail certain enforcement provisions of the Affordable Care Act (ACA) while the President works with Congress to repeal the landmark health care law. Consistent with his continued pledge to “repeal and replace” the ACA, President Trump argues that it is imperative for the executive branch to take all actions to minimize the “unwarranted economic and regulatory burdens of Act.” To that end, the Executive Order directed the Secretary of the Department of Health and Human Services and all federal agencies with authorities and responsibilities under the ACA (including the IRS) to exercise all authority to “waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act” that would impose any fiscal or regulatory burden on individuals and families, health care providers, insurers, pharmaceutical companies, or medical device manufacturers.
The Act’s individual shared responsibility provision currently requires individuals to indicate whether they have qualifying health care coverage or qualify for a coverage exemption when filing their annual federal income tax returns. Tax forms presently include an option where taxpayers can specify whether they have “full-year coverage.” Taxpayers without “full-year coverage” must make an individual shared responsibility payment for any months in which they had no coverage or applicable exemption. For this year’s tax season, the IRS adopted system changes that would automatically reject tax returns during processing if the taxpayer did not indicate their coverage status. However, in the wake of the President’s Executive Order, the IRS has now decided to suspend these newly adopted changes.
Accordingly, 2016 returns will now be accepted for processing even in instances where a taxpayer did not indicate their coverage status. Processing these “silent returns,” according to the IRS, will minimize the burden on taxpayers and therefore conform to the purpose of the Executive Order. Although it remains unclear what effect these changes will have on taxpayers in the long run, the IRS has vowed to continue processing returns as it did in previous tax seasons. Processing returns includes issuing follow-up questions and correspondence after the filing process is completed. The IRS did caution, however, that the legislative provisions of the ACA will remain in force until they are changed by Congress. Taxpayers, for now, are still required to follow the individual shared responsibility provision and make applicable payments when necessary.
*We would like to thank Samuel L. Winikoff, JD (Weiss Handler & Cornwell PA, Boca Raton, FL) and Nazanin Tondravi, JD, MPH, LHRM (Miami, FL) for respectively authoring and reviewing this email alert.