ALERT! – If You Are Undocumented and Uninsured, Do Not Pay the Tax Penalty

We have heard from several clients of Lal Legal that many undocumented immigrants, including DACA recipients, are erroneously paying the penalty for not having health insurance while filing their taxes for the past tax year.

Please note that you are not required to pay the tax penalty for being uninsured if your immigration status makes you ineligible to purchase health insurance through the Affordable Healthcare Act (ACA) marketplaces.

Ineligible immigration status includes being a U.S. citizen who lives abroad, a lawful permanent resident who resides abroad, and individuals who are not lawfully present. While individuals with deferred action or a pending application for permanent immigration benefits are considered lawfully present for purposes of the ACA penalty, individuals with DACA are not considered lawfully present, specifically for this purpose.

There is a long list of exemptions for the penalty, beyond lack of immigration status.  Individuals should inform themselves before paying the penalty, as some tax preparers are wrongly telling individuals to pay the uninsured tax penalty.

If you have already filed your taxes, and were incorrectly charged the penalty for not having health insurance, you can fix this by filing an amended tax return. This is a two-step process:

1. File an amended return – 1040X, and correct line 9 to enter “0”

2. File Form 8965 and enter “C” in “exemption certificate number.”

Additional details on other types of exemptions are available in the instructions for form 8965. You can also see the IRS advisory on this issue here.

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