Tax Questions? We’re not the experts, but below is what we do know.
For anything more complicated, we recommend you seek help from either Legal Aid or the IRS.
What is a Premium Tax Credit?
A Premium Tax Credit is an advance payment of financial assistance (through the Marketplace) that can be used right away to lower your monthly premium costs. If you qualify, you may choose how much advance credit payments to apply to your premiums each month, up to a maximum amount.
For example: Sally qualifies for a tax credit of $500 a month, which is $6000 for the year. She goes to select a plan, and decides on a BCBS Silver plan with a $570 monthly premium. She decides to apply $470 of her tax credit per month towards her premium. This means Sally will only pay $100 per month for her premium. Assuming her income doesn’t change, she will get the remaining $30 per month from her tax credit (which is $360 for the year) as a refund when she files her federal income taxes.
What if I do not file Federal Income Taxes?
Anyone who is legally present and lives in the state in which they are applying can enroll and purchase insurance. However, if you don’t have to file a tax return because your income is too low, you will not qualify for financial assistance. You are also not required to purchase health insurance and are exempt from the penalty for not having insurance.
What is the penalty?
The penalty, also known as the Individual Responsibility Mandate/Payment, is the fine that is collected by the IRS on your federal income taxes for not having health coverage. When someone without health coverage gets urgent — often expensive — medical care but doesn’t pay the bill, everyone else ends up paying the price. That’s why the health care law requires all people who can afford it to take responsibility for their own health insurance by getting coverage or paying a fee.
How much is the penalty for not having health insurance?
The penalty in 2015 is calculated one of 2 ways. You’ll pay whichever of these amounts is higher:
- 2% of your yearly household income. (Only the amount of income above the tax filing threshold for an individual is used to calculate the penalty.) The maximum penalty is the national average premium for a bronze plan.
- $325 per person for the year ($162.50 per child under 18).
You’ll pay the fee on your 2015 federal income tax return. Most people will file this return in 2016.
The fees for 2016 (to be paid on the 2016 federal income tax return, usually filed in 2017) are as follows:
- 2.5% of your yearly household income. (Only the amount of income above the tax filing threshold for an individual is used to calculate the penalty.) The maximum penalty is the national average premium for a bronze plan.
- $695 per person for the year ($347.50 per child under 18).
You will pay whichever is higher.
What happens if I don’t pay the fee?
The IRS will hold back the amount of the fee from any future tax refunds. There are no liens, levies, or criminal penalties for failing to pay the fee.
Who can I talk to about my tax concerns?
We recommend contacting your tax preparer, Legal Aid, or the IRS for questions regarding the Individual Responsibility Mandate/Payment.
- Legal Aid – (336) 272-0148
- Legal Aid (Winston Salem Office) – (336) 725-9162
- IRS – (919) 850-1100