In a recent report to Congress, the IRS stated that 4 million tax returns filed for the 2016 calendar year included an individual mandate penalty, which averaged $708.00.
After President Trump was inaugurated and he released statements and signed an Executive Order that he would be working to repeal Obamacare right away, the IRS announced on February 15, 2017 that it would not enforce the tax penalty for 2016 tax returns. In previous years, if a tax return was submitted and it did not answer the following questions or submit the required forms, the return would be rejected until the information was provided.
- An individual mandate penalty amount should be assessed
- An individual in the household is exempt from having coverage under the law due to having coverage through an employer plan, due to all coverage options being unaffordable under the law, or due to some other predefined reason under the law
- The household is exempt from having coverage under the law due to the reported gross income being below the tax filing threshold
- Everyone in the household had coverage for the entire calendar year
After the IRS’ announcement on February 15th, it would accept returns filed that did not provide this information. Despite this, 2.6 million tax returns were prepared and filed in 2016 by tax professionals.
It’s unclear whether Obamacare will be repealed and replaced anytime soon, but if it is, the individual mandate penalty will certainly go with it. Despite this, the IRS included in its report that it is reconsidering whether to allow silent tax returns on this issue and may reverse course and require the information to be submitted so that it can collect the penalty from everyone who is uninsured in a calendar year.