4 Million Tax Returns Volunteered Individual Mandate Penalty Despite Non-Enforcement by IRS


August 23, 2017

The IRS stated in a recent report to Congress that 4 million tax returns were filed for the 2016 calendar year that admitted to owing the individual mandate penalty under Obamacare despite the IRS’ announcement on February 15, 2017 that it would not reject any tax return that failed to provide that information. Of the tax returns that were assessed a penalty, the average payout was $708.

A number of the GOP Obamacare replacement bills included provisions that the individual mandate would be retroactively waived to 2016 and the IRS themselves even stated after President Trump was inaugurated that it would not enforce the penalty, but despite that, many millions of Americans admitted to violating what is still the law of the land.

In previous years under the ACA, if a tax return was filed that did not state that all of the people in the household had an ACA compliant health insurance plan for the entire calendar year, that a person or the whole household was exempt from having coverage for some reason or that the filer self-reported the penalty due for non-compliance, the IRS would reject the return until those fields were filled out. For the 2016 calendar year, the returns would be accepted even if those questions were not answered.

The IRS’ report to Congress included a note that they were still considering whether to allow silent responses to these questions or whether they should actively enforce the penalty again by rejecting tax returns that don’t fill out those sections.

Other interesting data from the report was that the number of tax returns assessed a penalty in 2016 is actually down by 1.6 million from 2015. Also, 2.6 million of the returns filed with a penalty were prepared by professionals. Almost 12 million returns were filed claiming either a household or individual exemption from the requirement to have health insurance under the ACA as well. A household exemption would be due to the household earning less income than the tax filing threshold. The individual exemption may be due to an individual having insurance through an employer, there being no coverage options that are deemed “affordable” under the law, or due to another particular circumstance like the individual is incarcerated, is part of a Native American Indian Tribe or a health care sharing ministry, or is living abroad.