In response to this post, several readers have accurately pointed out that a page of the IRS website, posted on March 25, clearly states that, “If you are not required to file a tax return and don’t want to file a return, you do not need to file a return solely to claim this exemption.”
Unfortunately, this highlights another problem with Obamacare implementation — the contradictory and confusing information on compliance. The chart directly below the text on the IRS website indicates that the only way to claim this exemption is on the tax return, consistent with the information on the healthcare.gov site.
Interestingly, neither of these sites contains any sort of citation as to the source material for these statements. One can only assume that the information provided therein is intended to paraphrase the relevant regulations. So, what does the law actually say on this point?
The Centers for Medicare & Medicaid Services (CMS) published final regulations on exemptions on July 1, 2013. The filing threshold exemption was finalized at 45 CFR 155.605(g)(3) and, according to a CMS September 18, 2014, memo, “applies to an individual who was not required to file an income tax return for such calendar year because his or her gross income was below the filing threshold, but who nevertheless filed a return, claimed a dependent with a return filing requirement, and as a result, had household income exceeding the applicable return filing threshold.” This exemption would be claimed on the tax return.
The September 14 guidance goes on to say that “any individual who does not have enough gross income to met the minimum threshold for having to file a tax return also should be entitled to a hardship exemption,” and provides that the Secretary, by virtue of her own authority, is providing that this should be the case, “regardless of whether they file a return and regardless of whether they claim a dependent.”
While it is commonplace for agencies to publish guidance as to interpretation or the agency view of its enforcement obligation, in this case, the guidance is actually in conflict with the letter of the regulations. Even the author of the memo acknowledges that mere guidance does not in itself change regulations that have been finalized after proper notice and comment: “CMS intends to propose to amend 45 CFR 155.605(g)(3) in this regard to include this hardship exemption in future rulemaking.” It appears that no such rule change has yet been proposed, never mind finalized.
So, while the language cited from the IRS website does, in fact, accurately reflect CMS’s intentions, it appears that neither site accurately portrays the rather narrow filing threshold exemption currently provided for under the regulations as they stand.
