Premium Tax Credit/Penalty

[Super Mom]

I have a client that will need to amend due to a corrected 1095 and they will get part of the credit the had to payback originally---around $500 so definitely worthwhile to amend. Question is they had marketplace coverage according to the 1095 until June. The TP didn't know she had been cancelled until she got a cancelation letter in October at which time she immediately got coverage backdated to 10/1. I was unaware of this, and marked the box "full year covered" on the original return. What should I do? Do they have penalties, or can I mark full year coverage since she got coverage as soon as she got the cancellation letter.

I know you may be wondering why did she get canceled. She had not received a bill for a few months and was told repeatedly not to worry about it and to wait till she got a bill to pay. Then they cancelled her policy for not paying! She is one of the many who will pay more for other insurance in order to avoid the ignorance and frustration of the marketplace!

Thanks for helping!

[kathyc2]

There is not a penalty if the gap of coverage is 2 months or less. Check her cancellation letter as it may have a later date than the June date showing on 1095.

[TaxGuyBill]

No, you can't mark the "full year" coverage if she did not have coverage for the full year. She can try to apply for a "hardship" exemption (probably #13) because of the Marketplace error. IF she is approved, they will send her an Exemption Certification Number (ECN) which you would enter on Form 8965 to waive the penalty. Nothing else in your description indicates she would qualify for a different exemption from the prorated penalty (3 months, if she had insurance for at least one day in June).

https://www.healthcare.gov/fees-exemptions/exemptions-from-the-fee/

https://marketplace.cms.gov/applications-and-forms/hardship-exemption.pdf