paying health care penalty

[oceanlovin'ea]

I remember hearing previously that if taxpayer owes money and part of that money is the penalty for not having health insurance, they can pay the amount of income tax they owe and mark the check that thisis to be applied to their tax liability and not health insurance penalty. Is this true?

Have a single client who made around $25,000 for the year. Got insurance through employer starting in September but has penalty. She was considered self employed and so has SE tax to pay.

If she doesn't have all the money to pay at this time, can she pay the amount of actual tax she owes now and pay the penalty later? Can she specify the payment to go to the tax?

Thanks

Linda F

[New York Enrolled Agent]

I remember hearing previously that if taxpayer owes money and part of that money is the penalty for not having health insurance, they can pay the amount of income tax they owe and mark the check that thisis to be applied to their tax liability and not health insurance penalty. Is this true?

See the IRM 5.1.2.8 regarding designated payments

[Rapid Robert]

I remember hearing previously that if taxpayer owes money and part of that money is the penalty for not having health insurance, they can pay the amount of income tax they owe and mark the check that thisis to be applied to their tax liability and not health insurance penalty. Is this true?

If she doesn't have all the money to pay at this time, can she pay the amount of actual tax she owes now and pay the penalty later? Can she specify the payment to go to the tax?

It's always possible to file a tax return without paying the full balance due by the due date, although to do so is breaking the law, making the person who does it an "illegal". Generally there is no criminal prosecution for breaking this particular law.

If the full balance due is not paid, the IRS of course is going to try to collect the difference. I think what you are asking is about the methods the IRS can use. For the Shared Responsibility payment, the IRS is prohibited by law from using levies, or liens disclosed to 3rd parties, to collect it. The can still use offsets of other payments to collect what is legally owed.

I don't know about "marking a check" having any effect, but generally, to answer your questions, yes it is true, and yes, she can not pay her full balance due now and then pay the remainder later. The only thing that is at all different is that the SRP goes into a slightly different collection bucket.

For example, at EFTPS, you can designate a payment separately for "1040 Health Care: Individual Responsibility".

[TaxGuyBill]

If she doesn't have all the money to pay at this time, can she pay the amount of actual tax she owes now and pay the penalty later? Can she specify the payment to go to the tax?

As the others noted, yes, she can designate what her payment is for. However, if she is intending to pay the penalty anyways, I don't really know if there is much of a point to do that (unless she isn't going to pay it for quite a while, then designating it would warn off levies and garnishments).

[oceanlovin'ea]

balance

She owes over $800 which is hard to come up with for a single working person on her income at one time. I just wondered if she paid the actual tax owed by next week she might not get penalties and interest for not paying her tax liability by due date.

She will probably pay whatever she can. It's just one of those cases where your heartstrings are tugged for these people. I have been working with this person for over 20 years.

Thanks

Linda F

[TaxGuyBill]

Now that I think about it, I think the failure-to-pay penalty (0.5% per month) may not apply to the healthcare penalty (but interest will still be charged on the unpaid amount), so it would save a bit of penalty if the payment was fully designated to the income tax owed.

Whether or not it is worth doing that to save about $2.32 per month (the 0.5% failure-to-pay penalty on a $463 healthcare penalty) , that is up to you and the client.