WPS Health Insurance Blog

Your income tax filing is more important this year

Posted by Ryan Kanable

Apr 16, 2013 9:00:00 AM

income taxes dueIncome taxes were due yesterday, April 15. If you’re like me, you waited until the last minute to get them done. If you had yours done early, my hat’s off to you. As we wrap up tax season, I thought this would be a great time to talk about some additional information that’s being collected this year and in years to come.

You see, health care reform created some new responsibilities for the Internal Revenue Service (IRS). Part of the Affordable Care Act (ACA) provides subsidies for Americans to help pay for health insurance coverage beginning on 1/1/14 if you purchase health insurance coverage from the exchange. Your income tax paperwork for this year can help set you up for these provisions of the ACA next year. Another part of the ACA requires almost everyone to have insurance or pay a penalty.


The 2012 tax return you file this year will help to serve as a baseline for whether you qualify for a premium tax credit, or subsidy, to help you afford coverage in 2014. However, if your financial circumstances change next year, you might still qualify for the tax credit if your income for the previous tax year was higher than it is this year. 

According to the Kaiser Family Foundation, premium tax credits from the federal government will be available for people whose income is between 100 and 400% of the federal poverty level who are not eligible for or enrolled in other affordable coverage (through an employer, for example) and who purchase a qualified health plan through a health insurance exchange. The premium tax credit is refundable, which means that it is available even if you have no tax liability. It is also advanceable, which means it is available as soon as you enroll in a qualified health plan. The premium subsidy can be paid directly to your insurance company to offset your premium.

To find out how much you might qualify for, check out Kaiser’s Health Reform Subsidy Calculator. It’s pretty slick.


You may have been wondering, “How’s the government going to know if I have health insurance or not?” The answer is that the health insurance coverage you have next year, in 2014, will be reported to the federal government. Annual reports have to be filed with the IRS by health insurers, employers that sponsor health plans, and agencies that administer government health plans. These organizations will also provide you with documentation about your coverage.

Then, in 2015 and beyond, when you file your income taxes, you will report whether or not you had health insurance. If you have a gap in coverage for a continuous three-month period or more during the previous year, you may have to pay a penalty tax. If so, the IRS will take the penalty tax money out of your tax refund.

What might the penalty tax cost you? It depends on the year. The chart below lists the annual totals that may be assessed.

Penalty tax amounts



2016 and beyond

$95 per adult and $47.50 per child (up to $285 per family) OR 1.0% of family income, whichever is greater

$325 per adult and $162.50 per child (up to $975 per family) OR 2.0% of family income, whichever is greater

$695 per adult and $347.50 per child (up to $2,085 per family), increased annually by the cost of living after 2016 OR 2.5% of family income, whichever is greater

To find out more about how the ACA affects the IRS and your taxes, take a look at the IRS website. This blog post is intended as general information, not tax advice. If you have questions, talk to your tax advisor or your attorney.

Find out more about health care reform in our Learning Center.

Topics: health insurance