As if insurance agents needed another reason to hate being involved with Obamacare, the IRS has recently reversed its position on “Silent Returns.” In 2017, the IRS’s position on electronically filed returns that did NOT indicated whether s/he had health insurance was to call this a “Silent Return” and process it. The taxpayer who owed a penalty could still collect his tax refund and might receive a bill for the penalty later.
Line #61 on the IRS tax form requires taxpayers to tick the box Yes this year
If your client didn’t have health insurance coverage in 2016 and was therefore subject to a penalty, all he had to do was not answer the question and file his returns. The IRS didn’t enforce the penalty…but now it is coming back for the money. We all know that the new administration is trying to dismantle the ACA, so we assumed that this policy of not enforcing the penalty would continue. Of course, everything stands to change and change and change again before tax season! But the IRS recently began sending letters to 130,000 people who filed Silent Returns in 2014 and or 2015 demanding the pay their tax penalty. If your return is Silent this year, the IRS will not process it or your refund.
The penalty for not having minimum essential coverage in 2017 is equal to 2.5% of your adjusted gross income or $695 per adult and $347.50 per child up to a maximum of $2,085, whichever is higher.
This amount needs to be figured and reported on your 2017 tax return that you will need to file by April 15, 2018. So what happens if you don’t pay your penalty? Congress never gave the IRS any authority to enforce the law. The IRS can’t send you to jail or place a lien on you. They can keep your refund and if you don’t have a refund, they can and will send you threatening letters.