Unknowingly had Medicaid while earning high-income - facing penalties for 2025 taxes?

This is actually a common situation, especially with automatic re-enrollment systems. Here's what you need to know: First, you generally won't face IRS penalties for being on Medicaid while having a higher income. The IRS doesn't penalize people for having health insurance, even if it was coverage you shouldn't have qualified for. The individual mandate penalty for not having insurance was effectively eliminated after 2018. The real concern is with your state Medicaid agency. Some states have rules about reporting income changes, and in theory, they could seek repayment of benefits if they determine you weren't eligible. However, if you never used the coverage (no doctor visits, prescriptions, etc.), there may be minimal or no benefits to repay. Your best course of action is to contact your state Medicaid office (which it sounds like you did), explain the situation honestly, and ask about your options. They deal with these situations regularly and often have procedures in place for resolving them. Keep documentation of when you discovered the coverage and your communication with the Medicaid office. This will help if questions arise later.

Had this exact situation happen to me last year and I found something that really helped. I used https://taxr.ai to upload all my documents including the Medicaid form and my income statements. Their AI analyzed everything and walked me through the exact reporting process for my situation. The tool explained that there's a difference between eligibility issues and tax reporting requirements. It confirmed I needed to report the coverage on my taxes but also generated a letter I could send to my state Medicaid office explaining the situation. This saved me tons of stress because I was freaking out about potential fraud accusations. It also checked if I had any tax credits or subsidies that might be affected by the Medicaid situation. Turns out I was still eligible for some deductions I thought I might lose.

Just wanted to update everyone. I was really skeptical about using an AI tool for something this important, but after the responses here I decided to try https://taxr.ai with my Medicaid situation. I'm honestly impressed. It immediately identified that in my state, there's a specific procedure for retroactive eligibility reviews that I needed to follow. The tool generated a customized letter explaining my situation and citing the specific administrative code sections that applied. It also showed me exactly how to report the coverage on my tax return while documenting that I'd taken proper steps to report the income change as soon as I discovered the issue. This gives me some protection if there's ever a question about whether I was trying to hide something. Definitely worth checking out if you're in a similar situation. It saved me from what would have been a very expensive consultation with a tax professional.

If you're trying to contact your state Medicaid office about this issue, good luck getting through to an actual person. I spent WEEKS trying to resolve a similar situation and kept hitting automated phone systems and voicemails that never got returned. I finally used https://claimyr.com to get through to a human at my state's Medicaid office. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c They basically wait on hold for you and call you back when they have a live person on the line. I was able to explain my situation to an actual caseworker who documented everything and sent me written confirmation that I wouldn't face penalties since I reported the issue as soon as I discovered it. Honestly this saved me so much frustration and probably protected me from potential issues down the road by getting everything properly documented.

OK I need to eat my words from my previous comment. After another week of failing to get through to anyone at my state Medicaid office, I broke down and tried Claimyr. They got me through to a live person in 38 minutes! I was able to explain my situation about being on Medicaid while my income was too high. The agent actually told me they have a grace period for reporting income changes, and since I called as soon as I discovered the issue, they're considering it within the reporting window. The agent created a case note in their system documenting when I found out about the coverage and my immediate attempt to report it. She said this documentation would likely protect me if any questions came up during an eligibility review. Worth every penny for the peace of mind alone. Sometimes you have to admit when you're wrong, and I was definitely wrong about this service.

Something to consider - check if your state has "transitional Medicaid" which allows people to keep coverage for a period (usually 6-12 months) after their income rises above the eligibility limit. This is designed to prevent people from immediately losing healthcare when they start making more money. If your state has this program and you qualified for it, you might have legitimately been eligible for part of that coverage period despite your higher income!

Just want to add something important: keep your tax return and documentation about this situation for at least 7 years. Medicaid eligibility issues can sometimes come up during later audits or reviews, especially if your state does periodic "lookback" checks. I had a similar situation in 2018, thought it was resolved, and then got a letter in 2021 asking for clarification. Having all my documentation saved me from a potential repayment demand.

This is a really helpful thread! I'm dealing with a similar situation where I apparently had Medicaid coverage in 2023 that I wasn't aware of. Reading through everyone's experiences has been reassuring. One thing I wanted to add - if you're in this situation, make sure to check if your state has any specific "good faith" provisions for people who unknowingly received benefits they weren't eligible for. Some states have policies that protect people from repayment obligations if they can demonstrate they acted in good faith and reported the issue promptly once discovered. Also, when you contact your state Medicaid office, ask specifically about their "timely reporting" requirements. Many states have different standards for when you're required to report income changes, and if you report within that timeframe after discovering the coverage, you may be completely protected from any penalties or repayment demands. The documentation advice from others here is spot-on. I'm making sure to keep everything in a dedicated folder because I've learned that government agencies can have long memories when it comes to these things!

I'm going through almost the exact same situation right now! Found out I had Medicaid coverage for most of 2023 when I definitely shouldn't have qualified based on my income. Like you, I had no idea I was even covered. What's been really helpful is learning that this happens more often than you'd think, especially with automatic renewals during the pandemic when many states suspended eligibility reviews. The key thing I've discovered is being proactive about reporting it once you find out. A few practical tips from my experience so far: - When you call your state Medicaid office, ask for a supervisor or eligibility specialist rather than general customer service - Be very clear that you want to report an income discrepancy and that you discovered the coverage accidentally - Ask them to document in your case file that you're voluntarily reporting this issue The good news is that most states distinguish between intentional fraud and honest mistakes. Since you're reporting this proactively and have documentation of your actual income, you should be in a much better position than someone who tried to hide an eligibility issue. Keep us updated on how it goes! These situations are stressful but it sounds like there are definitely ways to resolve them without major penalties.

I went through this exact situation in 2022 and wanted to share what I learned. The automatic re-enrollment during COVID really caught a lot of people off guard, especially those who had previously been on Medicaid but saw their income increase. Here's what worked for me: I contacted my state Medicaid office immediately when I discovered the coverage and was completely transparent about my income situation. They actually appreciated that I was being proactive rather than waiting for them to discover it during a routine audit. In my case, they classified it as an "administrative error" rather than a beneficiary error since I had never reapplied or updated my information - the system just kept renewing me automatically. This distinction was important because it meant no penalties or fraud investigation. The key things that helped my case: - I had clear documentation of my employment and income during the coverage period - I called as soon as I discovered the issue (within days of getting my tax forms) - I was honest about never using any medical services during that time - I asked for everything to be documented in writing They ended up requiring no repayment since no benefits were actually used, and there were no tax implications on my end. The IRS just wants you to report that you had coverage - they don't penalize you for having it even if you shouldn't have qualified. Don't panic about this - it's more common than you think and there are established procedures for resolving it!