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IRS Eases ACA Individual Penalty Exemption Process for 2018

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Part of the IRS headquarters building (Photo: Allison Bell/TA) (Photo: Allison Bell/TA)

At least for now, the Affordable Care Act individual major medical mandate penalty is still in effect for the 2018 benefit year.

But the Internal Revenue Service has now adopted a new policy that should make it easier for uninsured people to avoid paying the penalty.

The IRS set the policy in IRS Notice 2019-05, which affects the procedures for applying for hardship exemptions from the individual shared responsibility penalty.

(Related: 5 Great Individual ACA Mandate Exemption Excuses)

The ACA created Section 5000A of the Internal Revenue Code (IRC). IRC Section 5000A requires many people to have a minimum level of major medical coverage, or “minimum essential coverage,” or else pay a penalty.

A provision in the Tax Cuts and Jobs Act set the penalty amount at zero for the 2019 benefit year and later years, but not for 2018.

The IRS has always let people avoid paying the penalty by getting hardship exemptions, but many people had to get applications for some types of hardship exemptions approved by their states’ ACA public exchange programs.

For some people, the idea of getting an exemption from the ACA exchange system was intimidating enough that they have simply paid the penalty, or ignored the penalty bills, rather than seeking an exemption.

The IRS now says that, for 2018, taxpayers eligible for hardship exemptions can get the exemptions by claiming them on their tax returns, rather than by getting hardship exemption certification from the ACA public exchange system.

The new IRS notice implements a policy change that the U.S. Department of Health and Human Services announced in September.

The new rules apply to people who:

  • Have experienced personal or natural events that lead to significant, unexpected increases in essential expenses, and hurt their ability to pay for health coverage.
  • Would have to go without food, shelter, clothing or other necessities to pay for health coverage.
  • Have experienced other circumstances that prevent them from paying for health coverage.

Taxpayers who do want to use the old, exchange-based hardship exemption determination process can still use that, officials say.


A copy of IRS Notice 2019-05 is available here.

— Read  12 New 2019 Tax Numbers for Agents to Knowon ThinkAdvisor.

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