Tag: penalty

I was in jail for 4 months awaiting trial and ultimately was exonerated. During that time I was also uninsured. Do I owe a penalty for the months I was in jail?

There is an exemption for people who are incarcerated but it does not apply to people who were in jail awaiting trial.

However, for 2018, you could also claim a hardship exemption because you experienced circumstances that prevented you from obtaining coverage.  You can claim this exemption directly on your 2018 tax return, by checking the box on Form 1040, when you file next spring.

If I owe a penalty, when and how do I have to pay it?

If you did not maintain minimum essential coverage every month of this year and you don’t qualify for an exemption you will need to pay a “shared responsibility payment” to the IRS on your federal income tax return . If you are like most people, you will need to file your tax return by April 15 next year.

However, for 2018, the IRS has made it easier for people to claim a hardship exemption directly on your tax return by checking the box on Form 1040.  You can claim the hardship exemption if you experienced circumstances that made it hard for you to obtain coverage in 2018.  You will not be asked to provide documentation of the hardship when you file, though you should keep any documentation for your records.

I had several short coverage gaps in a year – I was uninsured in March, then again in August. Since the total gap was less than 3 months, am I exempt from the penalty?

The rule for short coverage gaps is that only the first short coverage gap in a year will be recognized. You wouldn’t be penalized for lacking coverage in March, but you may owe a penalty for your second gap in coverage in August if you don’t otherwise qualify for an exemption during that period.

However for 2018, if you experienced hardship that prevented you from getting coverage, you can claim a hardship exemption directly on your 2018 federal income tax return.

What’s the penalty if I didn’t have coverage in 2018?

The penalty for not having minimum essential coverage is either a flat amount, or a percentage of household income, whichever is greater.

For 2018 the flat amount is $695 for each uninsured adult and $347.50 for each uninsured child, up to $2,085 per family. The percentage penalty is 2.5% of family income above the federal tax filing threshold, which is $12,000 for a single filer, $24,000 for people who file jointly in 2018.  The percentage penalty is also capped at an amount equal to the national average bronze health plan premium available through the Marketplace.  That amount is updated annually in the instructions for IRS Form 8965.

The penalty is based on “coverage months.”  This means that each month you are uninsured in 2018, you may owe 1/12th of the annual penalty.  However, short spells of uninsurance may not be subject to a penalty.

For 2018, if you think you may owe a penalty for not being insured, you can claim a hardship exemption if you experienced circumstances that made it hard for you to get coverage.  With this exemption, you will not owe a tax penalty.  You can claim the hardship exemption right on your tax return by checking a box on Form 1040.  You will not be required to submit any documentation of the hardship with your tax return, though you should retain any documentation for your own records.

For more information about the penalty in 2018, also called the individual responsibility payment, see instructions for Form 8965 on the IRS web site.

My income is very low, so I’m only required to pay about $30/month for my health insurance premium. The tax credit picks up the rest, which is more than 90 percent of the total premium. I’ve missed 4 premium payments in a row. Can the insurance company cancel my coverage even though they got 90 percent of the payment on time from the IRS?

Yes.  A person receiving an advanced premium tax credit has a 90-day grace period to pay all premiums that are owed. If the amount owed for all outstanding premium payments is not paid in full by the end of the grace period, the insurer can terminate coverage.  The insurer would then have to return funds it received from the federal government for all but the first 30 days of the grace period.

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