Insurance Penalty - First tax return together

[pantonia 39]

I just received my first W2 and was excited to file for my first tax return with my husband. I started with turbotax, but when it got the Health Insurance part, it got confusing/depressing. Based on  the way I get asked the questions there, it seems we would have to pay a lot of money in penalties, but I want to make sure of this.

 

The situation in 2016, insurance-wise:

 

Me (immigrant):

January - February: NO INSURANCE - Was still in my home country (arrived in Texas on Feb. 28, on a K-1)

March - July: NO INSURANCE - Had applied for AOS and EAD but none had been approved yet. Couldn't work, didn't have other income.

July (end of) - August: NO INSURANCE - EAD got approved and started working that same week, but my employer insurance wasn't effective yet.

September - December: INSURED - Employer insurance kicked in.

 

My husband (USC):

January-August: NO INSURANCE - We couldn't afford insurance. He is a student and his (our) sole form of income until then was a monthly tax-exempt money he gets from the VA based on him being a student.

September - December: INSURED - My insurance through my job kicked in with him on it.

 

Even though I do lots and lots of research, it escaped me that apparently in order to be exempt of having insurance, you have to officially apply for the exemption and get a code or something. I just assumed that we were "obviously" exempt and that was that.

 

The tax filing process doesn't really let me explain anything. There's not checkbox for "I'm a foreigner who wasn't in the country" or "I wasn't allowed to work for most of the year" or "I had a job, the insurance just didn't kick in right away". 

 

What should I do?

... Do we file for the exemptions now and then do the tax return? Will there even be an exemption specifically applicable for any/all of our reasons?

... Do we just check the TurboTax options of "Health Insurance wasn't affordable for all of the months we weren't insured"? Turbotax seemed to let me do it alright, but 1. it's not the full picture of the situation (at least in my case) and 2. Without having filed for the exemption officially, it seems like I should't check it.

 

 

[yuna628 9,680]

Here's the thing... regardless of if you are a citizen or an immigrant, everyone in the US is required to obtain heath insurance or pay a penalty in taxes. And no, they don't really care if you can't afford it or if you weren't working.  The reality is, the penalty is cheaper than paying monthly premiums... so it doesn't really matter to them.

 

The other thing is, there is little effort to help citizens and their immigrant spouses understand that they are more than able to seek out coverage (that is if they can afford it) pretty much as soon as they get married. For instance, you could purchase a plan privately (as I did for my husband), or you could apply for O'care as soon as you get your NOA1 for the AOS (because marriage and immigration is your qualifying SPECIAL ENROLMENT PERIOD QLE). No need to wait, in fact it gets more tricky the longer you wait. Now they do allow exemptions for short periods of time, though I am not sure this will apply to you. I suspect there could be. Even still the amount owed if the penalty does apply should not be the full amount (at least for you - I cannot say for certain regarding your spouse). Programs like this will not have complicated questions that need answers for you: my suggestion would be to speak to someone at the IRS directly, or hire a CPA that is better versed in these matters to help you.

Edited January 20, 2017 by yuna628

[MariaR323 199]

I can't tell from your details exactly what you may/may not be getting penalized for. I can say for sure you should be using exemption code C for Jan-Feb for you. Mar-Aug penalty would apply. Sep-Dec you should have coverage.

 

The thing is I don't know how TurboTax works in that aspect and if it's applying the proper coding for the health coverage.

 

For your husband Jan-Aug penalty would apply and Sep-Dec should show coverage.

 

Another thing is, don't know how much income your husband had during the year but there may be another exemption code available for coverage determined to be unaffordable. But you have to do some calculations on that.

 

I'd suggest maybe go with an independent tax preparer because it does involve some work to do the calculations to see if you qualify.

[pantonia 39]

4 hours ago, yuna628 said:

Here's the thing... regardless of if you are a citizen or an immigrant, everyone in the US is required to obtain heath insurance or pay a penalty in taxes. And no, they don't really care if you can't afford it or if you weren't working.  The reality is, the penalty is cheaper than paying monthly premiums... so it doesn't really matter to them.

 

The other thing is, there is little effort to help citizens and their immigrant spouses understand that they are more than able to seek out coverage (that is if they can afford it) pretty much as soon as they get married. For instance, you could purchase a plan privately (as I did for my husband), or you could apply for O'care as soon as you get your NOA1 for the AOS (because marriage and immigration is your qualifying SPECIAL ENROLMENT PERIOD QLE). No need to wait, in fact it gets more tricky the longer you wait. Now they do allow exemptions for short periods of time, though I am not sure this will apply to you. I suspect there could be. Even still the amount owed if the penalty does apply should not be the full amount (at least for you - I cannot say for certain regarding your spouse). Programs like this will not have complicated questions that need answers for you: my suggestion would be to speak to someone at the IRS directly, or hire a CPA that is better versed in these matters to help you.

 

21 minutes ago, MariaR323 said:

I can't tell from your details exactly what you may/may not be getting penalized for. I can say for sure you should be using exemption code C for Jan-Feb for you. Mar-Aug penalty would apply. Sep-Dec you should have coverage.

 

The thing is I don't know how TurboTax works in that aspect and if it's applying the proper coding for the health coverage.

 

For your husband Jan-Aug penalty would apply and Sep-Dec should show coverage.

 

Another thing is, don't know how much income your husband had during the year but there may be another exemption code available for coverage determined to be unaffordable. But you have to do some calculations on that.

 

I'd suggest maybe go with an independent tax preparer because it does involve some work to do the calculations to see if you qualify.

So, for January/February I should have code C because I wasn't in the country yet. DO they let you put different codes for different parts of the year?

 

But then, I'm confused for the rest. I know that they do give you exemptions for not having enough income. In fact, if your income was so low that you didn't have to file for a tax return, you don't have to even apply for an exemption:

"You don’t need to apply for an exemption if you’re not going to file a federal income tax return"... (Healthcare.gov)

Our income, for tax purposes, was $0 from January-July, so until then, we weren't even gonna file for a tax return. Now that we are, we should have an exemption related to having too little income (actually none) to afford health insurance for that portion of the year.

 

That would be all fine and easy, except that when I was doing my taxes, it took the income I made in the last 5 months of 2016 and divided it evenly in the 12 months of the year. So it incorrectly showed that I did have income from January to July and therefore should have been able to afford some insurance then. If I go to a CPA, will I be able to put somewhere, that the income was from August-December, exempting us from the penalty for the rest of the year?

[MariaR323 199]

3 minutes ago, pantonia said:

 

So, for January/February I should have code C because I wasn't in the country yet. DO they let you put different codes for different parts of the year?

 

But then, I'm confused for the rest. I know that they do give you exemptions for not having enough income. In fact, if your income was so low that you didn't have to file for a tax return, you don't have to even apply for an exemption:

"You don’t need to apply for an exemption if you’re not going to file a federal income tax return"... (Healthcare.gov)

Our income, for tax purposes, was $0 from January-July, so until then, we weren't even gonna file for a tax return. Now that we are, we should have an exemption related to having too little income (actually none) to afford health insurance for that portion of the year.

 

That would be all fine and easy, except that when I was doing my taxes, it took the income I made in the last 5 months of 2016 and divided it evenly in the 12 months of the year. So it incorrectly showed that I did have income from January to July and therefore should have been able to afford some insurance then. If I go to a CPA, will I be able to put somewhere, that the income was from August-December, exempting us from the penalty for the rest of the year?

 

You don't need an actual CPA you just need a knowledgeable tax preparer who can decipher everything for you and properly code things on the forms