Best Practices For Individual Mandate Obamacare Compliance

Some people assume that because the Tax Cuts and Jobs Act removed the individual mandate for Obamacare compliance that taxpayers no longer need to worry about reporting coverage without facing a penalty.

The Tax Cuts and Jobs Act effectively repealed the individual shared responsibility requirement by making any payment due $0. However, this change doesn’t take effect until 2019. The individual shared responsibility requirement for Missouri Obamacare compliance remains unchanged for 2017 and 2018.

The IRS has posted best practices for tax return preparers addressing the Affordable Care Act’s individual shared responsibility requirement, also known as the individual mandate. The Service reminded tax preparers that the Tax Cuts and Jobs Act did not eliminate the individual shared responsibility requirement for 2017.

The IRS has cautioned that it will not consider a 2017 return complete and accurate if the taxpayer does not report coverage, claim an exemption or report a shared responsibility payment. In past years, the IRS processed these so-called “silent returns.”

Individual Mandate

Individuals without minimum essential health coverage must make a shared responsibility payment, unless exempt. Individuals with employer-provided health insurance, Medicaid and Medicare, and certain other health insurance coverage, generally are treated as having minimum essential coverage.

Some exemptions may be obtained from the ACA Marketplace. Other exemptions may be claimed on a taxpayer’s return. These exemptions include individuals who are members of federally-recognized Native American Nations, individuals who are incarcerated, individuals with a short gap in coverage, certain hardships and more.

Individuals make a shared responsibility payment when they file their return. The payment is a flat dollar amount or a percentage of income, whichever is greater.

Best Practices

A taxpayer can show they had minimum essential coverage by a number of methods. The ACA requires certain large employers to inform employees about their health coverage. Clients with coverage through the ACA Marketplace also receive notification. Individuals with government-provided coverage, such as Medicaid and Medicare, should have supporting documents.

A taxpayer may not have proof of coverage, in which case, the tax preparer should discuss the nature of the coverage including the months they were covered to get a reasonable assurance so the preparer can accurately complete the tax return.

If you have any questions about your individual mandate responsibilities for your tax return, please consult your Missouri CPA tax accountant in our office.