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IRS says it won’t penalize companies who don’t pay tax on time

January 18, 2018

Washington — The Internal Revenue Service said Jan. 17 that it won’t impose penalties on companies that don’t pay the medical device excise tax during the first three quarters of 2018.

The tax, which was imposed in 2013 under the Affordable Care Act, was frozen in 2015 and reinstated on Jan. 1, 2018. The 2.3 percent tax is paid by manufacturers, which may include dentists who make certain devices and appliances in their office. The devices can include restorative materials, instruments, impression materials and equipment.

In Notice 2018-10, the IRS said manufacturers are required to make semimonthly tax deposits for each period in which the tax liability is incurred. The first of those deposits is due by Jan. 29 but the agency said it won’t apply penalties for companies who fail to make deposits in the first three quarters of the year, in consideration of “the short time frame between the end of the moratorium period and the due date of the first deposit and in the interest of sound tax administration.” The normal rules will apply “with respect to deposits due during the fourth calendar quarter of 2018 and thereafter,” the guidance said.

Since 2013 the Association has worked to repeal the tax, which could ultimately result in increased costs for dentists and dental patients. The dental manufacturing industry has estimated that the medical device excise tax could increase the cost of dental care by more than $160 million annually. In a Jan. 18 letter to lawmakers, ADA President Joseph P. Crowley and Executive Director Kathleen T. O’Loughlin urged them to repeal the tax in the upcoming continuing resolution.

Follow all of the ADA’s advocacy efforts at ADA.org.