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Will the IRS fine you for not having health insurance? Maybe not, thanks to Trump

IRS Commissioner John Koskinen (AP Photo)

IRS Commissioner John Koskinen (AP Photo)

What happens if you can’t afford insurance, yet don’t qualify for heavily subsidized or fully subsided healthcare under Obamacare? Under the law, the IRS is instructed to fine you if you do not have health insurance. That fine isn’t small — 2.5 percent of your income or $695, whichever is higher.

However this year, the IRS might not go after you, thanks to an Executive Order signed by President Trump.

One of the first orders Trump signed was the “Executive Order Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal.” Since the order was signed, the IRS issued new guidance regarding the enforcement of the individual mandate penalty, which they call the “Individual Shared Responsibility Payment.”

The IRS website says:

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.

Did you follow that? Most Americans will probably be confused. The IRS is saying it won’t automatically reject your return if you don’t check the box saying you have or don’t have health insurance coverage (line 61 on form 1040). So, if you don’t have coverage and don’t check the box, you might not get fined. If your return is rejected for another reason, you may have to pay the fine.

If you have a clean return and don’t check any box on line 61, you won’t be fined.

So what should you do?

We can’t advise you, and the IRS’ instructions aren’t clear. Statistically, those with lower incomes get their returns rejected less. Those who take the standard deduction get their returns rejected less. Millennials mostly fall into these categories.

What is a bit ridiculous is that those millennials who are honest about not having health insurance will likely be fined. Those that don’t disclose may be rewarded. Frankly, being fined for not being able to afford insurance was always a bit dubious, but now the waters are muddied even more.

As April 18 approaches, many filers don’t know what to do. I asked the IRS to clarify their position on this regulation. I called in the questions and emailed them to their pressroom two weeks ago, and have yet to receive a reply.

Here are the questions I asked that remain unanswered:

-If filers say answer Form 1040, line 61, “Yes,” but actually do not have coverage — how does the IRS confirm they aren’t covered?

– If filers answer “no,” will they still be fined — despite others not being fined who don’t have coverage?

– Will the exceptions with Form 8965 be expanded to follow the previously mentioned EO?

We will wait to see if they provide answers by April 18.


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