What to Do If the IRS Sends a Notice Indicating You Owe ACA Penalties
The Affordable Care Act affected more than just health insurance options; the ACA also changed what you report on your tax returns and how much in taxes or penalties you owe. After the Internal Revenue Service processes your tax return, you might get a letter from the IRS. Find the number of the notice (beginning with “CP”) or letter (beginning with “LTR”) in the top right corner of the paper. If you see either CP14H or CP15H, keep reading for more information on why you received this notice and how to respond, or contact one of HealthSherpa’s consumer advocates for guidance.
Why You Received the Notice
You might have received either notice for different reasons. When completing your tax return, you might not have checked the “Full-year coverage” box at line 61 of the 1040 tax return, or you did not send Form 8965, Health Coverage Exemptions. For some reason the IRS believes that you owe an amount known as the shared responsibility payment. This payment is also known as the individual mandate fee, the Obamacare tax and ACA penalty.
What Is the Individual Shared Responsibility Payment
Most Americans are required to have minimum essential health care coverage throughout the year. Unless you had eligible coverage or meet one of the exceptions to the requirement, you must pay a penalty. The IRS calls this penalty your shared responsibility payment, or SRP.
What to Do With the Notice
- First read the notice carefully. The notice tells you the amount that you owe according to the IRS calculations, as well as the payment due date and your payment options.
- Gather the documentation related to you and your household members’ health care coverage for the year. If you bought health insurance through the HealthSherpa (aka Health Insurance Marketplace), then you should have received a 1095-A form for each person. You might also have received 1095-B or 1095-C forms.
- Review the information, and compare the documents with a copy of the tax return that you filed. If you received a CP15H notice, compare your submitted tax return with the revisions and recalculations made by the IRS.
- If you agree with the IRS, then make the requested payment before the due date to avoid interest charges. If you can’t pay the whole amount, then check to see if you can make a payment plan.
- If you disagree with the IRS, then call the toll-free number in the top right corner of the notice. You can also reach out to HealthSherpa’s consumer advocates to understand the implications and work with the IRS to sort out the discrepencies.
Things to Consider
Every person’s situation is unique, but there are some common scenarios that might apply to you.
- Did you and everyone else in your household have some form of coverage that meets the definition of minimum essential health coverage in each month of last year? If the answer is yes, then find proof. Your proof depends on the coverage, of course, and could be receipts of premium payments that you made, pay stubs showing deductions for insurance premiums, the 1095 information forms mentioned previously or insurance cards.
- Did you receive 1095 information forms for everyone in the household who had coverage? Did you get any corrected versions of the forms? Make sure the information reported matches your information.
- If you and everyone else in your household did not have health insurance for the whole year, then find out whether any of the exemptions to the ACA individual mandate apply for any of the months you were not covered.
- Talk to a HealthSherpa advocate about ways to avoid the shared responsibility penalty for this tax year if you owed last year.