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Tax penalty for lack of insurance? April 30 deadline to act

Did you get an unpleasant surprise when preparing your income tax return for 2014, in the form of a penalty for not buying insurance? The term the IRS uses is "shared responsibility payment." Sounds better than "tax penalty," right? You might well be surprised, since this is the first time this new penalty has appeared.

You get the penalty if you should have been able to afford to buy health insurance in 2014, but you chose not to buy it for all or part of the year. Since you didn't pay for insurance, you are now required to do the alternative, which is to pay some extra taxes to the government. This is part of the Affordable Care Act, enacted five years ago.

The idea is, if you feel you're so healthy that you don't need to bother to buy insurance, you should still pitch into the pot so that everyone else won't help pay your bill if you end up in the hospital. And, when you get older and less indestructible, you'll want insurance then, and you'll be glad that the cost is spread out more evenly across society.

Even though it is the law, some people got blindsided and didn't realize this penalty was coming. Meanwhile, you still are required to buy health insurance for this year, 2015. If you don't sign up for insurance this year, you'll get hit with yet another penalty one year from now, when you do your taxes for 2015. And, the penalty will go up.

Reprieve until April 30

There is one bright spot: Although the deadline to sign up for insurance for this year expired on Feb. 15, the government decided to give you extra time, to April 30, 2015, to sign up. If you do that, you'll avoid paying a penalty a year from now, and more important, you'll have health care coverage, of course.

In order to be eligible to sign up for insurance by April 30, you must not have any coverage now; you must owe a penalty to the IRS for not having insurance last year; and you were unaware or didn't understand that you were liable for a penalty until you found out while preparing your 2014 tax return.

It might be possible that you can get out of the penalty, if you can claim an exemption for financial hardship. That means that it wasn't affordable for you, in terms of a certain percentage of your household income, to buy insurance last year. If your tax preparer hasn't already checked into this for you, it is a question you could ask to get the answer.

Who else can sign up for coverage?

If you're not in the situation described above, you might still be able to sign up for coverage, instead of going without for the rest of this year. There are two big categories for this:

• If you qualify for Medical Assistance or MinnesotaCare, you can sign up anytime during the year. To get on one of these public programs, your income needs to be below 200 percent of the poverty line, which is $1,945 per motnh for a single person, $2,622 for a couple, $3,298 for a family of three, $3,975 for a family of four and so on.

• If your income is above these amounts, you are still able to sign up for an insurance policy if any of the following things have changed for you: Marital status, size of the family, loss of employer health coverage (such as when you lose or leave a job), your employer health coverage has changed or you moved in or out of this area of the state.

How do I apply?

The best way is to get free help from one of the several navigators in the Duluth area, who will guide you through the steps on the state's website, www.mnsure.org. If you want to, you can go on that website and do it yourself. But, it's a good idea to get the free help from people who know the ropes. There are navigators at Community Action Duluth, Health Care Access Office, CHUM, Salvation Army, Citizens Federation, Women's Center, and the Duluth Public Library. The Duluth Library (downtown) has added extra navigator hours, which are 11 a.m. to 1 p.m. Saturday and 3-7 p.m. Monday. These extra hours run through April 27.

The simplest way to connect with a navigator is to call the United Way information line 211 (landline phone) or (800) 543-7709 (if you're using a mobile phone), and they will get you connected to a navigator near you. There is also information on free local help for you to look at on the Insure Duluth website, www.insureduluth.org.

Buddy Robinson is staff director for Minnesota Citizens Federation - Northeast.   

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