Executive orders cause confusion, headache at IRS

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Affordable Care Act, Health care, President Trump, IRS, executive orders, ACAAcross the United States and around much of the world, people are trying to determine the impact of recent executive orders issued by President Donald Trump. The IRS is no exception; in fact, the Service is concerned enough to have suspended issuance of all new revenue rulings and procedures until they have a better grasp on the rules issued by the new administration.

The executive order primarily responsible for the confusion is titled “Reducing Regulation and Controlling Regulatory Costs,” and its purpose is to ensure the prudent and financially responsible expenditures of public funds. To that end, the order requires that for every one new regulation issued by the Internal Revenue Service, at least two prior regulations must be eliminated. Clearly this is a major issue that the IRS will need to determine how to deal with, and they are currently assembling a specific team to address it.

While new regulations will not be issued, the IRS has stated that it will continue to issue other updates such as interest rate and mileage rate revisions, as well as private letter rulings.

A second executive order, titled “Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal” has been causing headaches at the IRS as well. The purpose of this order is essentially to prevent the Affordable Care Act from having any negative financial impact on government agencies and United States citizens, pending the planned repeal of the Act.

Taxpayers are currently required to have some form of health coverage, or meet certain exemption criteria; otherwise, the taxpayer must make a “shared responsibility payment” with their tax return. The IRS has stated that it will continue enforcement of the law until it is changed by Congress. Prior to this order however, the IRS planned on automatically rejecting any tax return that was filed without an indication of the taxpayer’s health coverage status. Upon consideration of the executive order, the Service has done away with this requirement, and returns not indicating any health coverage status will be accepted and processed.

It is important to stress that the coverage mandate is still in full effect, and taxpayers filing returns without indication of coverage are likely to receive correspondence at a later date. The decision to allow acceptance of these returns was made in order to minimize undue burden on taxpayers, not to excuse taxpayers from filing correct returns. Due to continuing uncertainties regarding ACA, if you were a taxpayer without health coverage in 2016, we recommend extending your 2016 tax return until further guidance becomes available.

Stay tuned for further updates as the IRS and countless other agencies wade through the presidential transition process.

Austin Bradley, CPA