I was on a TN visa working in the US for >183 days in 2018 then went back to Canada in Aug. Can I be exempt from the health insurance penalty for the months after I left?

[chalkak]

I worked from January to August 2018 in the US (Calfornia) on a TN visa, and was covered for health insurance by my employer but only from April to August. Then I left the US in August back to Canada where I am a citizen, and stayed there for the reminder of the year.

Can I be exempt from the health insurance penalty (e.g. individual shared responsibility payment) for the months of September to December?

Turbotax has checkbox: 'Resident of foreign country or U.S. territory,' but under 'Learn more' it says:

Can I get a penalty exemption if I was a resident of a foreign country or U.S. territory?

Yes, the tax penalty for not having health insurance in 2018 can be waived if the individual was a U.S. citizen or resident but lived in a foreign country or U.S. territory for at least 330 days within a consecutive 12-month period that includes all or part of 2018.

This answer seems like it was tailored for U.S. citizens who worked in foreign countries long enough for them to be considered residents of that country for that tax year.  I am wondering if the 'foreign resident' category would still apply to me as well, since my permanent home is in Canada.

[KarenJ · Accepted solution]

If you moved out of the US in August 2018, you need to either file a full year US resident tax return declaring your worldwide income for calendar year 2018 (and claiming foreign tax credit to help offset any foreign income earned from August to December 2018) or you will have to file a Dual Status return (part year resident and part year nonresident).

Dual Status returns are a bit complicated and you are not allowed the standard deduction and must file married filing separately.  Please see Publication 519 page 32  https://www.irs.gov/pub/irs-pdf/p519.pdf

If you file a dual status return, you will be able to take an exemption for the months you were not in the US.

If you file a full year resident return, you can qualify under the physical presence test where you are overseas for 330 days in any 12 month period. You can claim the coverage exemption for any month during your tax year that’s included in the 12-month period.

[chalkak]

Thank you for your answer. Is there an option to file a dual status return using Turbotax Deluxe?

[KarenJ]

  If you file a dual status return, you can only use the filing status of married filing separately (if you are married) or single.  Also, you are not allowed to take the standard deduction. 
In order to prepare a dual status return in TurboTax, you will need to print a copy of the nonresident return (Form 1040NR from the IRS website) for your tax on US income after you left the US.  There will most likely be no US source income to enter for that time.  Nonresidents are only taxed on US source income.  If you did have US source income during your nonresident part of 2018, please let me know as you will need to complete a nonresident return with Sprintax.  Write on the top of the 1st page of the 1040NR, Dual Return. You will need to write in your name and address and input zero as your US source income (if that is the case). Enter your filing status (single or married filing separately).
<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/f1040nr.pdf">https://www.irs.gov/pub/irs-pdf/f1040nr.pdf</a>
Then for the resident part of the return you prepare in TurboTax, you are not allowed to use the standard deduction, only itemized deductions if you are filing a dual status return.  Also, you can either file single (if you are single) or married filing separately.
You must suppress the standard deduction.  Instructions for this are below.
When your resident part of the return is finished in TurboTax, print the return and write on top of the return, Dual Statement.
Put the 1040NR nonresident return on top of 1040  return and staple and mail to the IRS.  You must sign the 1040NR before mailing.  You do not need to sign the 1040 statement.
You will need to staple your 1040NR and 1040 together and mail to the following address:
If you  are not enclosing a payment then use this address...
Department of the Treasury
Internal Revenue Service
Austin, TX  73301-0215
USA
If you are enclosing a payment then use this address...
Internal Revenue Service
P. O. Box 1303
Charlotte, NC 28201-1303
USA
Please see more help on dual status returns see page 7 of Pub 519.
Publication 519
You must choose itemized deductions.  Please follow the below instructions to switch to itemized deductions.
TurboTax Online instructions for how to change from standard deduction to itemized deductions.
First, sign in and make sure your return is open. You should see 2018 TAXES in your left-hand menu as pictured below (if not, tap or click the upper-left corner to expand the menu or select Take me to my return).
Once your return is open:
1. From the left-hand menu, select Federal (on mobile devices, you might need to scroll down).
2. Now select Deductions & Credits near the top of your screen.
3. When you get to Now it's time for the fun part... Your tax breaks, scroll all the way to the bottom and select Wrap up tax breaks (if you don't see this button, select Skip to see all tax breaks, then scroll down again).
4. Continue through the interview until you see The Standard [or Itemized] Deduction is Right for You, pictured below.
5. On that screen, check the box Change my deduction to see the dollar amount for each deduction.
6. Select Continue if you want to save any changes. If you're switching to the itemized deduction, you may be prompted to upgrade.
You will need to answer questions in TurboTax as to whether you had health insurance for every month.  You need to check that you had an exemption as you Spent 330 days or more outside the US.
If you file a dual status return, you will need to also check that exemption that you Spent 330 days or more outside the US to avoid the health insurance penalty.