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September 22, 2017

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Now you can do your taxes without filling out the health insurance question


Brennan Linsley / AP

State Sen. Irene Aguilar, D-Denver, left, stands with activist Christina Postolowski, of the group Young Invincibles, as supporters of the Affordable Care Act who are also opponents of Colorado’s GOP-led plan to undo Colorado’s state-run insurance exchange hold a rally on the state Capitol steps in Denver, Tuesday, Jan. 31, 2017.

If you want to keep your health insurance status a secret from the IRS, the Trump administration just made it a little easier.

The policy change, confirmed by the IRS on Wednesday after elements were reported by the libertarian magazine Reason, does not do away with the Affordable Care Act’s requirement that all Americans who can afford it obtain health insurance or pay a fine. But it might make it a little harder for the IRS to figure out who is breaking the rules.

The IRS recently notified tax preparers that it will not reject tax returns that omit information about whether a filer had health insurance during the previous year. That’s actually a continuation of an informal Obama administration policy, but because of the way the decision was announced, it is likely to have broader effects on how many people report their insurance status to the government and how many people end up paying penalties for staying uninsured.

President Donald Trump signed an executive order on the day of his inauguration asking agencies to reduce burdens related to compliance with the health law. In its statement, the IRS indicated that this policy was related to that instruction.

Tax returns include a line that asks people to indicate whether they had insurance for the entirety of the previous year. If they did, they can check a box. If not, they are asked to provide more detail: about how much coverage they had; whether they had been granted an exemption; or, if they owe penalties, how much.

Under the Obama administration, the IRS would still process the tax return if a filer did not fill out this part of the return, but the policy was informal. Tax preparation software, used by individuals and professional tax preparers, essentially made it impossible to omit the section. The Obama administration had announced that it was ending its informal policy this year, and would begin rejecting returns that left off insurance information.

Under the new guidance from the Trump administration, that is changing, and the old policy is becoming more formal.

Julie Miller, a spokeswoman for Intuit, which owns the personal tax preparation program TurboTax and provides software for tax preparers and accountants, said that the company would be changing its products on March 2 in response to the change. Currently, the software does not allow customers to complete a return without providing health insurance information. After the change, the health insurance portion of the return, known as Line 61, will remain part of the software, but customers will not get an alert if they leave it blank.

As Reason reported, Drake Software, another company that provides programs for professional tax preparers, is making a similar change.

Even if it accepts returns with the section left blank, the IRS can still review these returns, audit such filers or impose penalties. And on Wednesday the IRS also clarified that it will continue to enforce the penalty. But the change may signal to some people that buying insurance is less important.

“While this announcement is consistent with the recent executive order, it is concerning to those who worry about stability in the ACA marketplace,” said Nicole Elliott, a partner at the law firm Holland and Knight, who was a senior director of operations for the Affordable Care Act at the IRS during the Obama administration.

The change was announced on the same day that the Department of Health and Human Services released proposed regulations meant to stabilize the Affordable Care Act’s marketplaces for individual insurance. Those new rules will mostly make it harder for sick people to sign up for insurance coverage only when they need it. Insurers have been asking for such changes; they argue that the pool of people buying Obamacare policies tends to be old and sick, making them expensive to insure. They have largely cheered the proposed rules.

But the tax change could cut the other way. The mandate to buy insurance was devised to bring healthy people into the insurance market, and a weaker mandate is likely to cause more such people to drop out.

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