No Health Insurance? Didn’t Check the Box on Your 1040 Tax Form? So What?

No Health Insurance? Didn’t Check the Box on Your 1040 Tax Form? So What?


This was once white-knuckle time for millions of taxpayers as they faced the final hours for filing their federal income tax returns while debating whether to check a box on the form showing that they had health insurance coverage or leaving it blank and facing a tax penalty or worse.

Since the Affordable Care Act was formally launched in 2014, taxpayers have had to check a box on line 61 of their 1040 federal tax returns declaring whether they or members of their family have qualified health insurance -- and provide documentation to prove it. This was required as part of Obamacare’s “individual mandate” to make nearly everyone without insurance eventually sign up.

Related: The IRS Has Just Made Obamacare’s Individual Mandate Optional

Even with this voluntary approach, the IRS collected individual mandate payments from 8.1 million tax returns in 2015 averaging $210 for a total of $1.7 billion. And for the current 2016 tax season, the IRS planned not only to jack up the penalties but – for the first time – make it mandatory for taxpayers to check the box or face not having their tax returns processed.

Because President Trump and the congressional Republicans stumbled badly recently and failed to enact their plan to repeal and replace Obamacare, the ACA’s individual mandate regulations are still in place. Yet the rules of the road of the government for enforcing the national health insurance program have changed since Trump took office in January, and a lot of the pressure from the IRS and the Department of Health and Human Services has been lifted.

 Trump signed an executive order shortly after taking office designed to weaken the Affordable Care Act by ordering the IRS and other agencies to take steps to reduce the economic onus of the law on individuals and businesses. By Feb. 15, the IRS responded by rescinding its get-tough plan to begin rejecting tax returns from people with no proof they were insured.

As a result of that backsliding, the agency will continue to grant taxpayers the discretion of checking the box to indicate whether they have health coverage or have paid a penalty to relieve them of that responsibility.

Related: Trump Era Begins with Moves Against Regulations, Obamacare 

“The Trump administration has made it pretty clear that this is not a priority for them,” Michael Cannon, director of health policy at the libertarian Cato Institute, said in an interview Monday. “So it appears that enforcement of the individual mandate is going to be even weaker than it was under the Obama administration.”

For sure, as the stroke of midnight Tuesday approaches, uninsured Americans will have a lot less to worry about when filing their 2016 tax returns, but they will not be totally out of the woods, according to Cannon and other experts.

People with no health insurance or a lengthy gap in coverage may be required to pay what the federal government deems a “shared responsibility payment,” as Kaiser Health News described in an analysis. In effect, it is a fine premised on the theory that even people unwilling or unable to buy insurance will eventually turn to a hospital or clinic for emergency treatment and someone else has to foot the bill.

Bucking the individual mandate may make sense to many younger, healthier people who don’t want to take on the cost of rising health insurance premiums and co-payments. For them, it’s a lot cheaper to pay the penalty than to purchase the coverage. Yet those who do that are gambling that they won’t have an accident requiring hospitalization or unexpectedly incur some life-threatening disease that could cost hundreds of thousands or even millions of dollars to treat over time.

Related: Why Congress Goes for the “Gold” When They Sign Up for Obamacare

The fine for 2016 taxes is the greater of $695 per adult or 2.5 percent of household income, up to the national average Obamacare “bronze plan” premium, according to Cannon. People who earn more than $28,000 a year would end up paying more than $695 in penalties, with a maximum fine of $2,676.

But there are numerous ways for uninsured people to slip the noose of penalties. There are scores of allowable exemptions from the fines, according to the IRS. Among the most common loopholes: Taxpayers’ income was so low –- less than $10,350 for an individual –- that they weren’t required to file a tax return. Or their income was so low that they couldn’t afford to buy insurance or qualify for a subsidy, even if they wanted to. Or they lived abroad most of the year and weren’t required to pay.

And if people don’t qualify for another of those exemptions, then “They can simply not pay that penalty,” Cannon said. “The worse the IRS can do is take your refund, if you are owed one. Or if you owe the government money, then you can pay only what you owe in regular income tax and decline to pay the mandate penalty.”

“Then all the IRS can do is send you nasty letters,” Cannon added.