Affordable Care Act

health insurance penalty

Can You Avoid The Penalty For Lack Of Health Insurance?

March 10, 2017 : Allie Freeland – Contributing Editor

Editor’s Note: Nearly 8.8 million Americans are enrolled in Marketplace Insurance (Obamacare) through the federal exchange program for coverage.

With talks of President Donald Trump repealing Obamacare, multiple questions have come up about healthcare insurance and taxes. Read on to get answers on silent returns and avoiding a health insurance penalty…

“What is a silent return?”

The IRS deems a return silent when you did not indicate full-year health insurance coverage, pay a penalty or attach an exemption form.

“Will silent returns for the 2016 tax year be rejected?”

Not automatically. While the ACA is still in effect, President Trump issued an Executive Order to the IRS to look for ways to reduce the administrative burden. The change the IRS made to comply with this order was to allow silent returns, meaning a taxpayer won’t get an automatic rejection if you file silently. However, if you choose to file silently and do still owe a penalty, the IRS has warned you risk receiving a notice.

“Do I still have to pay a penalty if I don’t have healthcare coverage?”

If you didn’t have health insurance for all or part of 2016, then you will owe a penalty unless you qualify for an exemption. Certain taxpayers can file for an exemption to avoid paying the penalty.

“Do I qualify for an exemption?”

Exemptions are usually based on income, residence, partial-year coverage, religious/cultural beliefs, and other factors. For more information, view the detailed list here.

Remember: You have the option to fast forward… Avoid the lengthy reading and connect with a tax professional at H&R Block to see if you qualify for an exemption. Find an office near you.

“How much is the health insurance penalty?”

If you did not have coverage in 2016, and didn’t qualify for any of the above exemption, you’ll pay the greater of the two amounts:

  • 2.5% of your yearly household income. Only the amount of income above the tax-filing threshold – about $10,300 for the individual – is used to calculate the penalty.
  • $695 per adult for the year and $347.50 if you are under 18. The maximum penalty per family using this method is $2,085.

Overall, the annual penalty is limited to the national average premium for a Bronze plan. For 2016, that is $2,676 for an individual and $13,380 per year for a family with five or more members.

“How do I amend a return with an exemption?”

If you filed a silent return, you can file an amended return using Form 1040X to amend a previously filed Form 1040, 1040A, 1040EZ, 1040NR, or 1040NR-EZ.

Feeling overwhelmed? It’s best to let an expert handle this. You can avoid paying substantial penalties if you submitted a silent return and qualify for an exemption.

Make an appointment with a tax pro at H&R Block near you now.               

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Allie Freeland – Contributing Editor

Allie Freeland – Contributing Editor

H&R Block

Allie is the Contributing Editor of the H&R Block blog, Block Talk. She has been a practicing grammar geek since 2007.

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