Most people are familiar with the Affordable Care Act (ACA) and the requirement to have health insurance or else be penalized on income tax returns. It’s certainly been a pain point over the last few years, especially for self-employed individuals. We have some good news for those that have been impacted!

There is a little known break that will help residents of most North Carolina counties (including New Hanover County, Brunswick, and Pender Counties) for 2017 and beyond. Judging by the number of income tax returns we’ve seen reporting a penalty when it should not have been, many income tax preparers in the area do not know about a new exception that exempts taxpayers from the penalty. Since there is only one marketplace insurance provider on the health insurance exchange for 2017 and 2018, taxpayers can claim a hardship exemption. With this retroactive change for 2017, our firm has saved 20+ clients over $50,000 in 2017 amended income tax refund claims.

For 2019 there are no tax penalties for not having health insurance, so it will be a non-issue and a hardship exemption does not have to be filed. What do you do if you are unsure whether you paid a penalty on your tax return for not having health insurance? On your 2017 income tax return you can look at line 61 of your 1040 income tax return. On your 2018 income tax return the penalty is reflected on line 61 of Schedule 4 (if you don’t have schedule 4 then you don’t have the penalty).

My goal today was to help make sure that you have not paid more in tax than you needed to for 2017 and 2018. If you have any specific questions, feel free to reach out to me.

Caroline Montgomery, CPA (NC License Number 39017), MSA, is tax manager and partner of Adam Shay CPA, PLLC. The most rewarding part of what she does is helping business owners and individuals achieve their goals, all while working with a dynamic team that is growing quickly. The firm focuses on a proactive approach by encouraging clients to minimize taxes via income tax planning and projections, or by focusing on other areas of their business as part of the firm's Virtual CFO services. The firm also offers tax preparation, fraud and forensic accounting and tax issue resolution services. She moved to Wilmington in 2014 and started at the firm in 2015. Caroline graduated with her her undergraduate and graduate degree in 2010 from East Carolina University. She is actively involved with NourishNC as their Treasurer and enjoys volunteering with various organizations throughout New Hanover County. In her free time, Caroline enjoys spending time with her husband, Mike, and dog, Mason, as well as travelling and going to the beach.