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For 2018 Filing Season, Taxpayers Must Adhere to ACA Health Coverage Requirements

The IRS is back on track in fulfilling and enforcing ACA requirements, as evidenced by new guidance about individual tax returns that don't address health coverage requirements. Read on to learn what you and your employees should do.
  • For the 2018 filing season, the IRS won't accept electronic returns from taxpayers who fail to address the health coverage requirements of the Affordable Care Act (ACA).
  • The IRS may suspend paper tax returns that don't address health coverage requirements and delay refunds.
  • While the IRS guidance pertains to individual taxpayers, employers should ensure the timely furnishing of Form 1095-C to their employees, as this form can assist employees as they file their personal income taxes.
  • This notice is indication that the IRS is back on track in fulfilling and enforcing ACA requirements.

IRS will only accept e-returns when taxpayers specify whether they had health coverage

For the 2018 filing season, the Internal Revenue Service (IRS) will not accept electronic tax returns from individuals who do not address the health coverage requirements of the Affordable Care Act (ACA). The IRS will accept electronic returns only when taxpayers indicate whether they had health insurance, had an exemption, or will make a shared responsibility payment.

The agency may suspend paper tax returns that don't address health coverage requirements until taxpayers send additional information. Under these circumstances, the IRS may delay any refunds.

Last year’s filing was originally required to indicate health coverage requirements, but shortly after the executive order signed by the President on Inauguration Day in January for regulatory bodies to ease the burden of the ACA prior to the repeal, the IRS changed its stance. It decided to accept returns absent the health coverage information.

To avoid refund and processing delays when filing their 2017 returns, taxpayers should indicate whether they and everyone on their return:

  • Had coverage;
  • Qualified for an exemption from the coverage requirement; or
  • Are making an individual shared responsibility payment.

This process reflects the ACA's requirements and the IRS' obligation to administer the health care law.

Significance for employers

While this guidance is for individuals filing Form 1040, employers should take note of this development for a few reasons.

First, the guidance affects self-insured employers — those that pay medical bills directly instead of paying premiums to an insurance company. The ACA requires, self-insured businesses that cover employee benefit plans to file reporting forms annually with the IRS, and to annually provide full-time employees with statements regarding their coverage. Self-insured employers must report any covered individuals under their health plan on either 1095-C for applicable large employers (ALEs) or 1095-B for non-ALEs. This information helps the IRS verify compliance with the ACA's individual responsibility requirement. Self-insured employers should ensure they are reporting this information accurately. Otherwise, they could put their employees in a precarious position with the IRS if the information does not reconcile with what the employee reported.

Additionally, it indicates that the IRS is back on track in fulfilling and enforcing ACA requirements. Employer’s should ensure they do their due diligence ensuring the information reported on both the individual shared responsibility provision and the employer shared responsibility provision are timely and accurate. With this in mind, employers should ensure that they furnish Form 1095-C or 1095-B to their employees in a timely and accurate manner, so that their employees have the information when they file their personal income taxes.

Businesses may want to consider using a provider such as Paychex for help with ACA reporting and tax filing requirements.

laurie savage headshot
Laurie Savage is a compliance professional and subject matter expert on the Affordable Care Act (ACA) for Paychex Inc. specializing in Health Care Reform.
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