ACA Penalty reversal

[Gretel]

I am starting a new thread related to a similar question on this TTB. I do not believe there is a more than slim to nothing chance that the ACA penalty will be reversed for 2016 already. I know nobody has a crystal ball but I also know the guesses from some are more valuable then guesses from others. Is it good practice to advise clients subject to the penalty to file for an extension?

[JohnH]

I don't have very many clients who are affected by the penalty. But for anyone who is, I am giving them the whole story and letting them make the decision. If they ask me for guidance, my ONE AND ONLY recommendation is to file an extension and see what develops. I have no other options to offer them, regardless of the amount of refund they might receive after paying the penalty. If Oct 15 rolls around and there is still any uncertainty over 2016, we can have another conversation.

I personally think any other course of action carries with it some degree of risk for the preparer. Maybe a lot of risk, more likely not so much. But I could be wrong.

[geekgirldany]

Hi, I hope everyone is doing well this tax season.

Is there a statement from the IRS on this or some organization?

I got an update email from Drake saying they are including a option to allow the taxpayer to not pay the ACA penalty.

[Rapid Robert]

Hi, I hope everyone is doing well this tax season.

Is there a statement from the IRS on this or some organization?

I got an update email from Drake saying they are including a option to allow the taxpayer to not pay the ACA penalty.

That's not what they said at all. They said that efiled returns which don't indicate whether or not there is ACA coverage will not be automatically rejected, which is the way it was last year. The taxpayer already has the option not to pay the ACA penalty, and IRS can only use refund offset to collect it, not levies or disclosure of liens.

Why isn't everyone getting all excited about possible retroactive repeal of Net Investment Income tax for tax year 2016? It's in exactly the same status as ACA penalty. Are you going to put clients on extension in the hopes that NII will be retroactively repealed?

[Roland Slugg]

If the ACA (Obamacare) isn't repealed or modified by mid-April (or mid-October for extended returns), and the IRS has made no announcement regarding its non-enforcement of certain parts, I don't see how we as preparers can ignore the premium tax, the NIIT or any other tax related elements that belong on a client's return. President Trump's EO directing the IRS to relax its enforcement is not the same as a full or partial repeal. If the law is eventually repealed, I'm sure the repeal will include a mandate for the IRS to review all affected returns and issue refunds automatically.

[JohnH]

I don't disagree with those who disagree with what I originally said. The logic set forth by Robert and Ronald makes sense. But I'm still recommending extensions to anyone affected. Most of those who have refunds (net off the penalty), will probably want to go ahead and file because they can't wait for whatever money they can get. Some who owe will want to go ahead and get it over with. And others who owe will usually be happy to get some additional time to pay (even thought they will pay a little interest & penalty extra if nothing changes).

In any event, it's up to them to make the call. No matter what may or could happen, I can can always remind them that I gave them all the info available and they made their decision.

[geekgirldany]

That's not what they said at all.

Well, I was trying to keep it as short as possible what Drake said in the email. Whatever....

I will recommend extensions to those who would like to wait who have refunds. John is right, on those who owe the penalty my clients are about on the same. I explain they make the decision.