TAX PENALTY

WHAT IS THE TAX PENALTY?

The federal income tax penalty (also called the “individual mandate” or the “individual responsibility payment” or a “fee”) is applied to people who do not have health insurance. Indian Health Service does not count as insurance under the Affordable Care Act so you will have to apply for an exemption if you do not have other insurance. For 2014, the tax penalty for adults is $95, in 2015 it is $325, and after that it is $695. For children, it is half that amount.

YOU WILL NOT HAVE A TAX PENALTY AND YOU DO NOT HAVE TO DO ANYTHING IF:

1. You have Medicaid, CHIP, Medicare, VA, or health insurance from your employer.

2. Your income is so low that you are not required to file taxes.

TO AVOID THIS TAX PENALTY IF YOU USE AN INDIAN HEALTH PROVIDER AND YOU DO NOT HAVE ANY OTHER INSURANCE, YOU MUST APPLY FOR AN EXEMPTION.

There are two types of exemptions for Native Americans:

1. Indian exemption

For people who are enrolled members of federally-recognized Tribes or shareholders in an Alaska Native regional or village corporation.

2. Hardship exemption for IHS beneficiaries

For people who use or are eligible to use the Indian Health Service, a tribally-operated clinic, or an urban Indian clinic (called I/T/U).

For a tax exemption application form, click here. Print this form and fill it out.

To claim your exemption on your federal income tax, fill out IRS Form 8965 and attach it to your EZ tax form or the longer form.  On Form 8965, use Part 4 and list all the people in your household who qualify for an exemption from the tax penalty.  Beside each person’s name, put the letter “E” in the first column if the person is an enrolled member of a federally-recognized Tribe, a shareholder in an Alaska Native Corporation (village or regional), or eligible for the Indian Health Service.  If a person in your family is eligible for less than the full year (due to birth, marriage, divorce, etc.) put the letter “E” in the months that they were eligible during the year.

If you have a Certification of Exemption from the Marketplace, you could use Part 1 of IRS Form 8965 instead of Part 4.  To use Part 1, list the names of the people with Certificates of Exemption and then write their Exemption Certificate Numbers (ECN).  If you have applied for an ECN, but you have not received it from the Marketplace or you have lost the ECN, just claim your exemption using Part 4.