For 2007, the most significant change to the Massachusetts tax code dealt with something I never thought I would be concerned about in my practice – health insurance. The Mass. Dept. of Revenue (DOR) is now the “health insurance police” and in charge of doling out tax penalties for those who are uninsured.
For 2007 returns, the rules were pretty straight-forward. You lost your personal exemption (which meant you had a smaller refund or even owed a little) if you were uninsured on December 31st. Appeals were available for those with special circumstances. Otherwise, nothing changed for most people.
For 2008, it is going to get dicey for uninsured residents. The penalty is 50% of the lowest monthly premium the taxpayer would have paid through the Commonwealth Connector. The penalty applies for each month the taxpayer is uninsured. The penalties are calculated based upon age and income. The highest penalty is achieved by being over age 26, earning over $31,200 and being uninsured the entire year. That will cost a single taxpayer $912. In the case of married taxpayers over the age of 26, earning over $42,000 and both are uninsured the penalty is $912 each. For those making under $31,200 (or $42,000 if married) the penalty still exists but it is lower.
Because the Commonwealth has made the penalty a tax issue, those individuals who are assessed a penalty and do not pay it will be subject to all of the usual DOR collection techniques including wage garnishments, bank account levies, federal tax refund offsets, etc.
I am once again reminding all uninsured clients that the Commonwealth has partnered with many insurance companies (including Blue Cross, Harvard-Pilgrim and Tufts) to provide health insurance for all. Lower income families may qualify for free or reduced premiums under the Commonwealth Care insurance program. Information and applications can be found at the Commonwealth Connector website at http://www.mahealthconnector.org/portal/site/connector/.
