The Centers for Medicare and Medicaid Services (CMS) today announced a new, more streamlined way for consumers to claim a hardship exemption from the tax penalty imposed for not maintaining health coverage for 2018 on their federal income tax returns, making it easier for taxpayers across the nation to claim their exemption.
Of the $3 billion the Internal Revenue Service (IRS) collected from taxpayers in individual mandate penalties in 2015, over 5 million households, or nearly 80 percent, earned $50,000 a year or less. “The individual mandate penalty is yet another example of how the Affordable Care Act (ACA, or Obamacare) hurts low and middle income Americans the most, and today’s action reflects our commitment to minimize the impact of Obamacare’s failures,” according to the CMS announcement.
The ACA requires that all Americans get health coverage that qualifies as minimum essential coverage (MEC) or pay a penalty, commonly known as the individual mandate. Individuals who do not maintain enrollment in MEC or qualify for an exemption must pay a penalty. Individuals may be eligible for a hardship exemption if they experience certain circumstances that prevent them from obtaining coverage, such as homelessness or a fire, flood, or other natural disaster.
Specifically through today’s guidance, CMS is announcing additional details on how the agency is making it easier for taxpayers to claim a hardship exemption on a federal income tax return without presenting the documentary evidence or written explanation generally required for hardship exemptions.
Today’s announcement also follows the 2017 Tax Cuts and Jobs Act (TCJA), which reduced the individual mandate penalty to $0 for months beginning on or after Jan. 1, 2019.
“Today’s announcement shows how President Trump’s Administration is working to ease the burden of Obamacare.” said CMS Administrator Seema Verma. “Although the tax cuts signed by the President earlier this year eliminate the mandate penalty starting in 2019, Americans are still under threat of the penalty for this tax year of 2018. This guidance will simplify how consumers claim the hardship exemption from the individual mandate directly on their tax return.”