Q. When I file my taxes, my preparer asks me if I have health insurance. How is that any of their business?
A. Telling the government whether you had health insurance in the previous year is now part of the tax return process. This started in 2015, when you filed your 2014 tax return. And although you have to honestly complete your tax return, the IRS also receives reporting from the exchanges, large employers, and health insurance carriers, which helps them verify whether or not a tax filer had coverage in the prior year, and for how many months.
If you were not covered, you are expected to pay a penalty.
In 2014 the penalty was:
- $95 per uncovered adult and $47.50 per child (up to $285 for a family) OR
- 1 percent of individual income above and beyond the filing threshold ($10,000 for an individual, $20,000 for a family), whichever is greater.
In 2015, the penalty was:
- $325 per uncovered adult and $162.50 per child (up to $975 for a family) OR
- 2 percent of individual income above and beyond the filing threshold ($10,300 for an individual, $20,600 for a family), whichever is greater.
In 2016, the penalty climbs to:
- $695 per uninsured adult plus $347.50 per child (up to $2085 for a family) OR
- 2.5 percent of income over the filing threshold (the 2015 thresholds, with an inflation adjustment) whichever is greater.
After 2016, the penalty rises with increases in the cost of living (COLA).
If you owe a penalty, the IRS will subtract the penalty from any refund it owes you. If you’re not owed a refund, the penalty will stay on your record, and will be withheld from any future refunds you’re owed. However, the penalty will not accrue interest like other IRS penalties, nor can the IRS utilize liens, levies, or criminal prosecution to collect it.