ACA, IRS, mandate

Employers who could be subject to the Affordable Care Act’s (ACA) employer mandate penalties should be very interested in the latest move by the IRS. 

The IRS just said it will be accepting “silent” tax returns from individuals this season.

What is a “silent” tax return, you ask? A silent return is one that is filed with the IRS with no response on line 61 of Form 1040. This is the line in which taxpayers must indicate whether they had health insurance for the entire year.

Previously, if a taxpayer filed a return that was silent, it would be rejected. But that is no longer the case.

Bottom line: The IRS is no longer requiring taxpayers to indicate whether they’ve complied with the individual mandate to file their tax returns.

This is in response to President Trump’s executive order on the ACA, which directed federal agencies to exercise their authority 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.”

The IRS didn’t make the change to the reporting process public. Instead, it has been letting tax-preparation companies know it won’t reject silent returns this filing season.

In an email obtained by the San Francisco Chronicle, the IRS said:

“The recent 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.”

Many took this news to mean that the individual mandate may no longer be enforced, but the IRS cautioned that’s not the case:

“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.”

The IRS then went on to say that taxpayers who file silent returns may receive follow-up questions and correspondence.

Some tax preparers have even suggested that filing silent returns could delay refunds.

Potential effect on employers

So what exactly does all of this mean for employers — and why should they care?

This new move by the IRS seems to suggest that it may be considering no longer enforcing the individual mandate — and if that’s the case, the employer mandate may be next.

Currently, employers are wrapping up their ACA reporting processes for the 2016 tax year, and they should continue to do so. But, given this move by the IRS and Trump’s executive order, it now appears there’s at least an outside chance the IRS may consider dropping employer mandate enforcement as well.

Still, it bears repeating that the IRS has given no indication that it is considering not enforcing either mandate, so employers and individual taxpayers should proceed as if penalties for non-compliance will be issued.


Both mandates already appeared to be on shaky ground, after Republicans in Congress announced their plans to attack the ACA through a process known as reconciliation.

The process would allow Republicans to vote on budgetary pieces of the law without giving Democrats a chance to filibuster. While the reconciliation process limits how the GOP can reshape the law, three ACA provisions seemed fixed squarely in the party’s cross-hairs:

  • the individual mandate (which is imposed with a tax)
  • the employer mandate (which is imposed with a tax), and
  • healthcare subsidies issued to individuals (funded using the above-listed taxes).

With ACA employer reporting season coming to a close, it’s likely employers will have to take a wait-and-see approach to finding out whether the IRS plans to impose “share-responsibility” penalties on those who fail to fulfill the law’s requirements.

For now, the IRS is saying the law will still be enforced. Stay tuned.

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