I’m seeing a lot of questions on my tax professional newsgroups and discussion boards about the so-called “silent return” provision that has made so much news lately, and I want to set the record straight here.
For this filing season, the IRS had put system changes in place “that would reject tax returns during processing in instances where the taxpayer didn’t provide information related to health coverage.” (I.e., they were “silent” on the topic.) However, due to an executive order, they have removed this barrier to filing.
From a recent IRS website post:
“Consistent with that, the IRS has decided to make changes that would continue to allow electronic and paper returns to be accepted for processing in instances where a taxpayer doesn’t indicate their coverage status.”
However — and herein lies the confusion — this does not mean the ACA laws have changed (yet).
“Legislative provisions of the ACA law are still in force until changed by the Congress, and taxpayers remain required to follow the law and pay what they may owe.”
What it does mean is (as with any other area in a return where a taxpayer or preparer enters information that is incorrect, or does not answer a required question), the IRS has every right to come back and inquire, request further information, or even audit. If the taxpayer is found to be out of compliance with the law, then corrections, penalties and interest would be due.
“Processing silent returns means that taxpayer returns are not systemically rejected by the IRS at the time of filing, allowing the returns to be processed and minimizing burden on taxpayers, including those expecting a refund. When the IRS has questions about a tax return, taxpayers may receive follow-up questions and correspondence at a future date, after the filing process is completed.”
This is no different than how the same issue was handled last filing season: the requirement was there, but ignoring it did not prevent your return from being e-filed or processed.
“This is similar to how we handled this in previous years, and this reflects the normal IRS post-filing compliance procedures that we follow.”
In other words — if your client refused to answer whether they were required to file 1099s or not, you wouldn’t just leave the answer blank on the tax return; you’d make it clear to the client that this is required information. It’s the same thing here. Just because refusing to answer the question about health insurance coverage will no longer prohibit the return from being processed does not mean you do not have to answer the question. You are simply inviting your client to be audited, which is doing them a disservice.
More here, from Accounting Today: IRS puts new regulations and ACA coverage requirement on hold