IRS penalties for failing to have health insurance


The fee for not having health insurance in 2016. The fee is calculated 2 different ways – as a percentage of your household income, and per person. You’ll pay whichever is higher. Percentage of income: 2.5% of household income with a Maximum: Total yearly premium for the national average price of a Bronze plan sold through the Marketplace. Per person: $695 per adult and $347.50 per child under 18 with a maximum: $2,085


Attorney Tom Olsen: Dave, let's talk about health insurance, because we now know that you are required to maintain health insurance, and the first year or so, when they did that, they were not checking it against your tax return, but now if you don't file, have health insurance, there'll be tax penalties for you.

Dave: Yes, that's a relatively new issue, like you mentioned that we are required to have health insurance that's qualified to be adequate coverage, and if you don't have the qualified health insurance, then there is a potential penalty that you pay on your tax return, so, that penalty has gone up for 2016 to upto 21/2% of your income, up to certain thresholds, so there is a penalty that is applicable beginning last year, and like you said, the IRS does get a copy of your health insurance, so they do know what your premiums, that you're paying, that you do have, your essential coverage. 

Attorney Tom Olsen: All right. Is the IRS getting that information, be a [unintelligible 00:01:05], I'm getting a form, and I'm giving that form to you, or is it, health insurance companies give in that information directly to the IRS.

Dave: Depending on who you work for, if it's a large company, or a smaller company, you're going to get that 10-99 from either the health insurance company, if it's a small company, or if you have an individual [unintelligible 00:01:21], and then, or the IRS is going to get it directly from the employer if you work for a large employer.

Attorney Tom Olsen: Okay, I have my-- I have private health insurance that does not come through my company, so am I giving that information to you, or is IRS getting it directly? 

Dave: Both. You're going to give it to the IRS directly, your health insurance companies going to give it directly to them, and they’re going to give you a copy as well, so then it's up to you to report that on your tax return, like you have the minimum essential coverage, and you're not subject to the health insurance penalty.

Attorney Tom Olsen: Okay, so penalty this year, 2016, is two and one half percent, how m-- is that penalty going up?

Dave: Yes, it's up to 21/2%, and there is a cap on it per person, so the cap for this year is $695 per person.

Attorney Tom Olsen: Okay.

Dave: That's the maximum. Up to three individuals on the tax return.

Attorney Tom Olsen: But it's still going up every year.

Dave: It is going up every year. Yes.

Attorney Tom Olsen: All right. Very good.