Freebie tax tip.
If you have your 2016 federal tax return prepared and filed by H & R Block (and probably including other tax preparation individuals and chains), you may unknowingly be paying the Obamacare tax that for all practical purposes is no longer in effect.
On January 20, 2017, President Trump issued the “Executive Order Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal” which effectively does away with the Obamacare tax penalty.
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“Sec. 2. To the maximum extent permitted by law, the Secretary of Health and Human Services (Secretary) and the heads of all other executive departments and agencies (agencies) with authorities and responsibilities under the Act shall exercise all authority and discretion available to them 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 has issued s statement on President Trump’s Executive Order stating they will not reject for processing tax returns that do not show an amount for the Obamacare tax:
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“This year, the IRS put in place system changes that would reject tax returns during processing in instances where the taxpayer didn’t provide information related to health coverage.
However, the Jan. 20, 2017, 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.
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.
Processing silent returns means that taxpayer returns are not systemically rejected by the IRS at the time of filing, allowing the returns to be processed and minimizing burden on taxpayers, including those expecting a refund. When the IRS has questions about a tax return, taxpayers may receive follow-up questions and correspondence at a future date, after the filing process is completed. This is similar to how we handled this in previous years, and this reflects the normal IRS post-filing compliance procedures that we follow.“
The IRS budget has been cut by 18 percent since 2010, and next year President Trump has proposed to slash the IRS budget by more than 14 percent. Thus, the IRS will not have the budget or staff to “issue follow-up questions and correspondence” or to audit and assess the Obamacare tax penalty if you do not self-assess the Obamacare tax penalty on your 2016 tax return.
Andrew P. Napolitano, a former judge of the Superior Court of New Jersey and senior judicial analyst at Fox News Channel had this to say about President Trump’s Executive Order:
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“He ordered that regulations already in place be enforced with a softer, more beneficent tone, and he ordered that no penalty, fine, setoff or tax be imposed by the IRS on any person or entity who is not complying with the individual mandate, because by the time taxes are due on April 15, the IRS will be without authority to impose or collect the non-tax tax, as the individual mandate will no longer exist. Why take money from people that will soon be returned?”
H & R Block has decided to ignore both President Trump’s Executive Order and the IRS’ statement when preparing their clients’ 2016 tax returns. They will assess the Obamacare tax penalty on your tax return if you did not have health insurance.
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“What does the Executive Order about ACA mean for my 2016 tax return?
The Executive Order is not an Obamacare repeal, so there is no immediate impact on 2016 tax returns. There is currently an evaluation underway by the IRS and CMS about how the ACA is administered to see fi there are opportunities to reduce administrative burdens. Until this evaluation is complete, it is impossible to know if there will be any changes and how those potential changes will impact 2016 and future tax returns.
Do I still have to pay a penalty if I don’t have healthcare coverage?
I you didn’t have health insurance for all or part of 2016 then you will still owe a penalty unless you qualify for an exemption.”
Depending on national tax preparation chains to prepare your tax return can cost you money, you owe it to yourself to educate yourself and be knowledgeable about your tax return.
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