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April 2, 2017


Obamacare penalties under Trump: What if you file a ‘silent ‘return’?

It’s been nearly two weeks now since the Republican-controlled Congress was unsuccessful in its attempt to repeal the Affordable Care Act (ACA), despite campaign promises to do so.

President Trump called it a learning experience. House Speaker Paul Ryan acknowledged that the ACA, also known as Obamacare, remains the law of the land for the foreseeable future.

That means Obamacare penalties for individuals who don’t have health insurance remain on the books. But can taxpayers avoid those penalties with the Trump administration in office?

It’s been a confusing situation. When tax-filing season opened, Barak Obama was still the president and the IRS initially rejected so-called “silent returns” (returns that do not confirm insurance coverage). The IRS changed this policy after President Trump took office and directed agencies to make it easier for people to comply with the ACA.

The unsuccessful attempt by Congress to repeal the ACA made the question of the penalties for noncompliance even more uncertain.

Some tax preparers are concerned that filing a silent return could increase the risk of a tax audit or getting an IRS notice. But two largest tax preparation companies, TurboTax and H&R Block, are allowing taxpayers to make the choice to roll the dice with silent returns, after warning them of the possible consequences.

Last year, 6.5 million taxpayers paid penalties to the IRS for not having health insurance. For some people, paying these penalties – which start at $675 per adult – makes more sense than spending thousands of dollars a year to buy insurance.

How actively the IRS will pursue the collection of these penalties in the new administration remains to be seen. Under the ACA law, the IRS isn’t allowed to use the full array of collection tools, such as tax liens and garnishment. But it is allowed to deduct the penalties from federal tax refunds you might get in the future.