Monday, February 20, 2017


I have decided to interrupt my tax season blogging hiatus to discuss a recent tax development.
Perhaps the most controversial component of the Affordable Care Act (aka “Obamacare”), and the component I oppose the most (along with “age-weighted” premium calculation) is the Shared Responsibility Penalty.
The individual shared responsibility provision of Obamacare requires that each taxpayer, and each member of a taxpayer’s household, either have “minimal essential” health insurance coverage for the entire year or qualify for a health coverage exemption.  If you do have appropriate coverage or qualify for an exemption you are subject to the Code Sec. 5000A Shared Responsibility Payment, aka the penalty for not being insured.
The collection of the Shared Responsibility Penalty is not subject to criminal or civil penalties under the TaxCode, and interest does not accrue for failure to pay such assessments in a timely manner. The only way the IRS can collect an unpaid penalty is by offsetting a current or future refund.
On January 20, 2017, the idiot in the White House signed his first executive order directing the Secretary of Health and Human Services and other department and agency heads to exercise all available authority and discretion to “waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act 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.”
A major manifestation of Trump’s mental disorder is the fact that be believes he can do no wrong.  I, and many others, believe he can do no right.  However, in this specific situation only, his action with this executive proclamation has had a good outcome.
Earlier this year, the IRS was originally rejecting returns during processing when the taxpayer didn’t provide information related to health coverage – i.e. they were “silent” and did not check the box to indicate that they had “full-year coverage”, did not identify an exemption, and did not calculate and include the penalty. However, based on idiot Trump’s executive order, the IRS reversed that position and is now accepting both electronically filed and paper filed returns that are “silent” as to health care coverage.  If you submit a return that is “silent” regarding coverage and requests a refund the return will be timely processed and the refund issued.
The IRS does say “taxpayers may receive follow-up questions and correspondence at a future date, after the filing process is completed”, so, depending on how thing play out in Congress, taxpayers who are “silent” about health coverage on their 1040 or 1040A may receive a notice from the IRS after the tax filing season.
The Republican Party, which now controls Congress, and the idiot in the White House have vowed to promptly repeal Obamacare, and eventually replace its appropriate components with new health care legislation.  At the very least they will repeal many of the components of the ACA, including the Shared Responsibility Penalty.
I strongly oppose the “self-assessment” of IRS penalties like the underpayment of estimated tax or shared responsibility penalties. I especially oppose requiring a taxpayer to pay someone to assess them a penalty.
I will never, under any circumstance, prepare a Form 2210 to calculate a penalty for underpayment of estimated tax as part of the filing of any tax return. If the IRS wants to charge the taxpayer an underpayment penalty that is their right. I have no problem charging a taxpayer a fee to assist in reducing, removing, or abating an IRS assessed penalty – because the client is getting real value for the fee paid in that situation.
I feel the same way about the Shared Responsibility Penalty, especially since the IRS announcement that remaining “silent” about health coverage will not delay the processing of the tax return or the issuance of a requested refund.
At this point, with the repeal of either the entire Affordable Care Act or at least the shared responsibility penalty eminent, and the fact that the IRS does not have the authority to collect any assessed penalty other than by offsetting future refunds, I feel the best course of action for a taxpayer, or a tax preparer, is to remain “silent” about health coverage when the taxpayer would be subject to this penalty, and not include a penalty assessment as part of the tax filing.

No comments: