Part year resident NJ - Health coverage for dependents

[drsalmanshah165]

I am filing my tax return this year 2020 as a head of household with two dependents (sister and mother). My job was in Maryland state and we were living in MD from 1st Jan 2020 till 5 June 2020 and moved to New Jersey and live there till 6th December. My dependents are above age 18 and have no income. I was teleworking from NJ. My dependents have no health insurance throughout the year. Do I need to pay the penalty for them or I just need to check the Maryland months because of the part-year resident status? I am confused. Also, my earning in NJ is around 20850$ but after entering everything in TurboTax software it shows my taxable income as 16425$. Now do I have to pay penalty for my dependents health coverage or I should check all the boxes for months and they are already exempted?

[WendyN2]

Since you are discussing the differences between NJ and MD, I am already sure you know this:

          "As of 2021, there are penalties for being uninsured       

           in Mass., New Jersey, California, Rhode Island,

           and the District of Columbia"

For the $2k you've identified as your NJ earnings, my question to you is did you have NJ IT withheld? The reason I ask is that you begin by stating that you were teleworking, which means that your place of residence is where you worked from if you did not have NJ IT w/h. In addition, I am hoping that given the age of your dependents (over 18 as you stated) that they still, for all other reasons being, qualify as your dependents. 

Having said all of that, the NJ penalty imposed is 2.5% (plus the below) of your modified adjusted income, SO, if your total income is only that $2k that you mention, then your penalty would be zero anyway. Here is the full calculation that will also answer your question:

New Jersey’s mandate includes a penalty amount as the greater of:

• 2.5% of modified adjusted gross income, or
• $695 per adult (adjusted for inflation) and $347.50 per child, capped at three times the threshold regardless of family size or $2,085 (adjusted for inflation).

[drsalmanshah165]

Thank you for your reply. What would you say about the below statement I found on https://www.nj.gov/treasury/njhealthinsurancemandate/exemptions.shtml 

Individuals who are not required to file a New Jersey Income Tax return are automatically exempt and do not need to file just to report coverage or claim the exemption.

[LenaH]

Per the State of New Jersey, you would not have to file a part-year return for your level of New Jersey sourced income (approximately $2,000 as you stated above). Therefore, if you do not have to file a return, you don't have to claim an exemption on the coverage. Even if you did file, you would not have to pay a penalty due to your income level, as WendyN2 stated previously.

That being said, if New Jersey taxes were withheld from your income, then you should file to get a refund of tax paid. 

For NJ filing information and limits on income, please see NJ-1040NR. 

@drsalmanshah165

[drsalmanshah165]

Sorry, I update the total NJ earnings and yes tax withheld is 623$.

[drsalmanshah165]

Hi,

I just updated the NJ earnings. Sorry, I wrote 2K instead of 20K. I paid the NJ taxes also

[LenaH · Accepted solution]

Considering your updated New Jersey sourced income, then you would have to file a New Jersey part-year resident return. In addition, part-year residents must have coverage or qualify for an exemption for each month of their New Jersey residency. If you or anyone in your tax household did not have the required coverage and does not qualify for an exemption, you owe a shared responsibility payment.

If you were a full-year resident, and your New Jersey Gross income on line 29 was $20,000 or less ($10,000 if your filing status is single or married filing separate return), you would not owe a shared responsibility payment. However, for part-year residents, your income for the entire year, not just the period of NJ residency, is used to determine whether you will owe a shared responsibility payment. 

There are exemptions to the health mandate. Please see the NJ Health Insurance Mandate Coverage Exemptions to determine if you would qualify for any of the listed exemptions. 

@drsalmanshah165

[Traceyg3362]

So I just completed my daughters 2020 return and we have an exemption number from the state because she is below the poverty line and turbo tax still showed she owed the 600. Why didn’t the exemption work? 

[LenaH]

It depends. If you are claiming the exemption of poverty, please ensure you enter A-3 and check off every month the exemption applies. 

When completing her New Jersey return, please ensure you follow the steps below:

1. On the page titled Did you have coverage for some of 2020? select Yes, I had coverage during the part of the year (since she has an exemption). 
2. Click Edit next to her name on the page titled Indicate which months you had coverage in 2020.
3. Enter the exemption code and check off all the months that the exemption code applied. I have attached a picture below for additional guidance using the poverty code, which is A-3.
4. Click continue.
5. On the page Your New Jersey Bottom Line (NJ-1040), the penalty for healthcare is removed.

Please see Claim Exemptions for a list of exemptions and codes. 

@Traceyg3362

[aa2014]

Hello,

I have a similar situation. I lived in NJ from Jan 1st - Aug 31st 2022. During that time, I had full health insurance.

I sold my house and moved out of state on Aug 31st.

However, I forgot to update my address in some places and with my employer (even though I was working remotely from out of NJ state).

Would I be fined the shared responsibility payment, even though I physically moved out of state on Aug 31st?