During the election season I never touched on politics. Since I never thought it was my place to take sides, I stayed on the sidelines. Now there is a different issue that has come up and it has come up from a campaign promise of President Trump. As this action by President Trump can affect ones taxes and financial situation, I believe it is appropriate for me to comment about this impact but I will remain non-committal as to my position.
As most have hopefully realized by now, there is a connection between your tax return and the Affordable Care Act/Obamacare (and since I have seen recent data that says many don’t realize it, please know that those are two names for the same thing). Since President Trump’s first executive order displayed his intentions to undo any aspects of the ACA that he could as quickly as possible, it is not surprising that us in the tax world are closely watching this.
Unfortunately, we are largely in another wait-and-see area now, though. We have just moved into a further shade of gray (of which I hear there are at least 50, some of them darker) because the executive order doesn’t lay out definite action steps. Instead it states that agencies and authorities, “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.”
So how is the IRS handling this and how does it affect your current tax filing?
Well, you should currently not make any changes and not wait to file your taxes. Hopefully, that’s clear enough to move us back toward black and white areas.
There are a couple of other definites we can say, too. First, the IRS was rejecting returns earlier in the season that did not include information related to health coverage. Now, however, lacking that information is no longer resulting in an automatic rejection.
This does not mean that there will not be penalties for those who did not carry health insurance without qualifying for an exemption. And that penalty can be big, $695 per adult and up to $2,085 per family, or 2.5% of the family income, whichever is greater. As the IRS has warned, new legislation – an Act of Congress- will be required to change those aspects of the ACA.
The debate over the Affordable Care Act is going to continue for the foreseeable future and changes to it seem likely, though I would not hazard a guess just how far they will proceed. No matter how quick they come, though, we are already deep into the 2016 tax season, with returns already being accepted and refunds given. I would be totally surprised to see any legislation having an effect on this tax filing season.
What will this mean next year - tune in next year to know that. In the meantime, proceed as you would have before the election and inauguration and know that we will be here along the way to help you with any questions you may have about this confusing situation.