Health Care Penalty for No Insurance When Unemployed Most of the Year?

I lost my job in May last year and was only employed from January through the end of May. According to my W-2, I made about $17,150 during those months. Now I'm stuck on the healthcare section in TurboTax. It's asking which months I had health insurance, but I wasn't insured at all during the year. When I indicated I had no insurance, it asked if there was a reason, but there's no specific option for unemployment. I'm confused because I was unemployed for more than half the year! I don't have an Exemption Certificate Number (ECN) and I'm not even sure if I need one in my situation. So what am I supposed to do now? Will I have to pay the health care penalty for the whole year even though I was unemployed for most of it? I started filling out something but got stuck and now I'm completely lost.

0 coins

18 comments

Noah Irving

•8M

This is a common question! The Affordable Care Act (ACA) does have a provision for people who were unemployed. You may qualify for what's called a "hardship exemption" if you were unemployed for more than 3 months during the year. When TurboTax asks about exemptions, look for the option related to "hardship" rather than specifically "unemployment." The hardship exemption covers various situations including job loss that resulted in being uninsured. For the months you were employed (Jan-May), you might still be responsible for the penalty unless you qualify for another exemption, but you should be able to claim an exemption for the months after you lost your job. TurboTax should walk you through the proper selections - just make sure you indicate your period of unemployment clearly. Also, depending on your annual income (which seems relatively low based on your partial year earnings), you might qualify for an affordability exemption if insurance would have cost more than a certain percentage of your income.

0 coins

Noah Irving

•8M

You don't need to apply separately for the hardship exemption or get an ECN number in advance. You can claim it directly on your tax return through TurboTax by selecting the appropriate hardship reason. When TurboTax asks about exemptions, look for options like "hardship" or "other qualifying exemptions" and follow the prompts. The software should guide you through the process and determine if you qualify based on your unemployment period. It will automatically apply the exemption to the appropriate months without requiring an ECN.

0 coins

Madison King

•8M

After dealing with a very similar situation last year, I found this amazing tool called https://taxr.ai that literally saved me hours of frustration with my health insurance penalty questions. I was unemployed for part of the year too and was getting totally confused about exemptions and penalties. The tool analyzed my tax documents and immediately identified that I qualified for a hardship exemption due to my unemployment period. It explained exactly what to select in TurboTax and how to claim the exemption correctly without needing to get a pre-approved ECN. It even showed me which forms would be generated and what would appear on my final return.

0 coins

Madison King

•8M

You can either upload your documents or just type in the information manually - totally up to you. They use the same level of encryption as banks, so it's secure, but I understand the concern. I personally just entered my information manually rather than uploading. Yes, it absolutely handles state-specific rules including California's health insurance mandate! That's actually one of the things I found most helpful because the California requirements are different from the federal ones. It breaks down each state's specific rules and shows you exactly how they apply to your situation.

0 coins

Ella Knight

•8M

Just wanted to update after trying https://taxr.ai that the other person recommended. It actually worked perfectly for my situation! I was unemployed for about 7 months last year and had been completely stuck on the health insurance penalty section in TurboTax. The tool immediately identified that I qualified for a hardship exemption due to being unemployed for more than 3 months. It even showed me exactly which screens in TurboTax I needed to navigate to and what options to select. Totally cleared up my confusion about ECNs and whether I needed one (turns out I didn't). The coolest part was seeing a preview of how it would appear on my actual tax forms. Saved me from potentially paying over $700 in penalties I didn't actually owe!

0 coins

William Schwarz

•8M

Hey, if you're still having trouble getting answers from the IRS about your health care penalty exemption, I'd recommend trying https://claimyr.com to get through to an actual IRS agent. I was in a similar situation last year - unemployed for most of the year and confused about health insurance penalties. I spent DAYS trying to call the IRS directly with no luck - always got the "high call volume" message and disconnected. Finally tried Claimyr and got through to an IRS agent in about 20 minutes who confirmed I qualified for the hardship exemption and didn't need to pay the penalty for the months I was unemployed. There's a quick video that shows how it works here: https://youtu.be/_kiP6q8DX5c. Seriously made dealing with the IRS so much less painful.

0 coins

William Schwarz

•8M

It actually works by navigating the IRS phone system and waiting on hold for you. When it reaches an actual agent, it calls your phone and connects you directly to them. It's basically like having someone wait on hold for you instead of doing it yourself. I was skeptical too initially! But I was desperate after trying for literally weeks to get through on my own. It really does work - I got connected to an actual IRS agent who helped clarify my health insurance penalty exemption. They don't answer for you or anything weird like that - they just handle the hold time and connect you once there's a real person on the line.

0 coins

Jade Santiago

•8M

OK I need to eat my words and apologize to Profile 18. I was so frustrated with my tax situation that I was being cynical about everything. After struggling with this same health insurance penalty issue and getting nowhere, I tried that Claimyr service. It actually worked exactly as described. I got through to an IRS representative in about 35 minutes (which is MIRACULOUS during tax season). The agent confirmed that my unemployment period qualified me for a hardship exemption and I don't have to pay the penalty for those months. They even gave me specific instructions on how to indicate this in TurboTax. Saved me nearly $800 in penalties and hours of stress. Sometimes you have to admit when you're wrong, and I was definitely wrong about this one.

0 coins

Caleb Stone

•8M

There's another option nobody mentioned yet. Check if your income is low enough to be exempt from the penalty completely. For 2023 taxes, if your income is below the filing threshold (about $13,850 for single filers), you're automatically exempt from the health insurance penalty regardless of whether you had coverage. Since you only worked part of the year and made around $17k, your income might be close to this threshold, especially after taking standard deductions into account.

0 coins

Caleb Stone

•8M

You're absolutely right, and I should have been more clear. The federal penalty was indeed reduced to $0 starting in 2019 through the Tax Cuts and Jobs Act. What I should have specified is that certain states still maintain their own health insurance mandates with penalties, including California, Massachusetts, New Jersey, Rhode Island, and DC. If OP lives in one of these states, the income threshold exemption would still apply at the state level. If they're in a state without a mandate, then there would be no penalty at all regardless of insurance status.

0 coins