How to Pay the ACA Individual Mandate Tax

It’s important to be aware of any tax penalty you may be responsible for if you went without qualifying health insurance coverage last year or in recent years.

The 2020 individual tax filing deadline (for tax year 2019) is Jul. 15, 2020.^[1]

This year you won’t owe a federal tax penalty for going without qualifying coverage under the ACA^[2] since the tax penalty was set to $0 on Jan. 1, 2019.^[3]

However, you could still owe a tax penalty this year if:

• You still need to file federal taxes for tax years 2017 or 2018^[4] for which you didn’t obtain an exemption and went without minimum essential coverage for more than three months.^[5]
• You live in a state that has enacted a state mandate and tax penalty since the federal change took place.

Let’s look at this topic in more detail so you’re prepared as you head into tax season.

Please note: the materials available at this website are for informational purposes only and not for the purpose of providing legal or tax advice. You should contact your attorney or tax professional to obtain advice with respect to any particular issue or problem.

Filing a Federal Tax Return if You Owe a Federal Penalty

Tax Year 2019

For tax year 2019, Form 1040 will no longer include the “full-year health care coverage or exempt” box, and Form 8965 (Health Coverage Exemptions) will no longer be used since you no longer have to report coverage or pay the shared responsibility payment.^[6]

Tax Years 2017 and 2018

If you’re filing a federal return for 2017 or 2018, you must still report your coverage, obtain an exemption or pay the tax.^[7] However, if your gross income is below the filing threshold for that tax year and you’re not required to file a federal tax return, you are also automatically exempt from the ACA individual mandate for that year and not subject to the payment.^[8]

Not sure if you need to file a federal return? Use the IRS’s Interactive Tax Assistant tool to determine if you need to file a federal tax return (tax years 2017-2019).

If you’re preparing your taxes using the IRS forms, you’ll use the Instructions for Form 8965, “Health Coverage Exemptions,” to both determine if you must make the payment and calculate the amount. Then you will report the result on the designated line on Form 1040.^[9]

Remember, you only pay the penalty for months during which you or a family member did not have coverage or a qualifying exemption.^[10] Learn more about exemptions you may be able to qualify for.

Getting Free Tax Preparation Help

Contact a tax professional if you’re not sure if you owe an individual shared responsibility payment or need other help understanding and completing your taxes. You may be able to access free professional tax preparation help via the Volunteer Income Tax Assistance Program (VITA) or Tax Counseling for the Elderly (TCE) if you qualify.

Learn more and find free tax preparation resources near you.

What Happens if You Owe Federal Income Taxes and Don’t Pay?

Any taxes you owe are due in full at the same time you file your tax return.^[12]

If you’re filing your 2017 or 2018 federal taxes, the individual shared responsibility payment may be added to your total tax liability, which could lower the refund amount you would otherwise have received.

If you don’t fulfill your federal tax responsibility when you file you’ll receive a bill for the amount you owe. At that point, the collection process continues:

• Until your balance is paid
• Until the IRS can no longer legally collect the tax (i.e., if a law is changed)^[13]
• For up to 10 years – after that, the collection period typically expires.^[14]

It’s also important to remember that interest may accrue on any unpaid balance, so it’s usually a good idea to address any owed taxes sooner rather than later.^[15]

Payment Plans

If you are unable to pay the full federal tax balance you owe at once, you may be able to pay in monthly installments.^[16] Visit the IRS website to learn more about payment plan options, costs, and fees.

Do You Still Need Health Insurance for 2020?

Open enrollment ended for most of the U.S. in December. If you missed it, you may have trouble enrolling in minimum essential coverage unless you:

• Qualify for an individual special enrollment period^[17]
• Can access a COVID-19 special enrollment period
• Qualify for Medicare, Medicaid or CHIP^[18]
• Are a member of a federally recognized tribe or ANCSA shareholder^[19]
• Are able to obtain qualifying health coverage through your employer

If you can’t access a comprehensive major medical policy right now, you may still want to consider some amount of health coverage to help in case an unexpected accident or critical illness requires covered healthcare services like emergency care, hospitalization or surgery.

Short term health insurance may be an option for anywhere from 30 to 364 days, though these types of policies aren’t available in all states and are not ACA-qualifying major medical insurance.

That means they don’t include coverage for pre existing medical conditions or essential health benefits. Policies have annual maximum benefits limits and are underwritten. Your premium is based on a number of factors including your health status and the benefits you select.

You can typically apply for a short term policy online and begin your coverage as soon as your application is accepted and you’ve paid your first month’s premium. To find out how much a short term health insurance policy could cost you, get a quick quote.

Get a Short Term Health Insurance Quote

Summary + Next Steps

It can be challenging to keep up with changing tax and healthcare laws.

For this year’s federal income tax filing season (2019), you won’t have to pay the ACA tax penalty if you went without qualifying coverage in 2019. However, you may still owe a payment for prior years or due to a state mandate depending on where you live.

If you’re going without major medical coverage in the coming year, you may still be able to enroll in temporary, limited benefits via a short term medical policy if you qualify. Learn more about short term health insurance or get a quote to see plans available in your area and compare costs.