The IRS does not audit health insurance. However, they may audit your taxes if you claim a deduction for health insurance premiums. If you are self-employed and have health insurance, you can deduct the cost of your premiums on your taxes.
How often does the IRS audit health insurance?
The IRS does not release statistics on how often it audits health insurance, but it is generally believed that audits are rare. However, if the IRS believes that you have underreported your income or made other errors on your tax return, you may be selected for an audit.
What are the consequences of not having health insurance?
If you don’t have health insurance and can afford to pay for your own health care, you may be subject to a tax penalty. The penalty is calculated as a percentage of your household income or a flat fee, whichever is greater. For example, in 2016 the penalty was 2.5% of your household income or $695 per adult ($347.50 per child under 18), whichever was greater. The penalty increases each year. In 2017, it’s 2.5% of your income or $912 per adult ($454 per child), and in 2018, it’s 2.5% of your income or $1,360 per adult ($690 per child).
What are some tips to avoid an audit?
The best way to avoid an audit is to be proactive and stay organized. Make sure you keep good records of your income and expenses, and file your taxes on time. If you are self-employed, be sure to keep track of your business expenses and mileage.
If you are audited, the IRS will look at your financial records to see if you have reported all of your income and paid the correct amount of taxes. They may also ask questions about any deductions or credits you have claimed. Be prepared to answer their questions and provide documentation to support your claims.
How to appeal an audit decision
If you disagree with the IRS’s audit decision, you have the right to appeal. The first step is to file a petition with the Tax Court. This must be done within 90 days of receiving the notice of deficiency. If you do not file a petition, the IRS’s decision will become final.
If you file a petition, the case will be assigned to a judge who will oversee the proceedings. Both sides will present their arguments and evidence. The judge will then issue a decision.
If you are still not satisfied with the outcome, you can appeal to the U.S. Court of Appeals for the appropriate circuit. This must be done within 30 days of receiving the Tax Court’s decision.
Appealing an audit decision can be a complex and time-consuming process. It is important to seek professional help if you are considering this option.
The short answer is yes, the IRS can audit your health insurance. However, it’s important to keep in mind that the IRS audits less than 1% of all tax returns, so the odds are actually quite low that you’ll be selected for an audit. Still, it’s always best to be prepared and to have all of your documentation in order just in case you are selected. Thanks for reading!