I used health.gov for insurance. I received a credit of $900 each month and paid $50 for the balance of the insurance. Now I owe $1500 in federal taxes, is that correct?

[Ballygirl886]

I used to always get a refund from both federal and state do I have to give up the credit for the health insurance to go back to getting a refund?

[Opus 17 · Accepted solution]

We can't see your return.  If your figures are correct, you owe what you owe.

Remember that if you get a tax refund, what that really means is that you paid too much to the government during the year.  They kept your money as an interest-free loan, and they graciously give it back when you file your return.  If you owe (for example) $2000 in taxes, you can have $39 per week of withholding, and get no refund, or you can have $139 per week of withholding and get a $5000 refund.  But you have less money each week, because you over-paid the government in every paycheck.

Also, you got $10,000 of free money for health insurance, and might have to pay back $1500 of it.  You still got $8500 of free money.  

Depending on your overall income and other situations, you might have to repay part of the insurance subsidy you got earlier in the year, which was based on your estimated future income.  If your actual income was higher than the estimate, you might be entitled to less credit. 

[Mashuggar]

This is also happening to me, I've had the same marketplace insurance for 3 years and my base pay has not changed, but this past year I worked a lot of overtime and my earnings for the year were greater then what was on record on the marketplace. How am I suppose to predict for the year that I'm gonna have overtime to put in the marketplace, do I really need penalized for wanting to work?

[AmyC]

You aren't being penalized, you just were not paying as much as you should based on your income. Anytime you see your income having a significant change, you can change your income with the marketplace. You also have the option to make extra Payments to the IRS anytime you have extra income during the year. For example, you sell stocks or get a big bonus that isn't taxed. Owing more than $1,000 will usually earn you  penalties for underpayment of taxes.

The IRS will also let you Apply online for a payment plan.

@Mashuggar 

[Ballygirl886]

Thank you so much for your reply. That all makes sense and puts things in perspective for me. I can also use this to help a couple of friends. Also thank you for letting me know how I can avoid having to pay taxes for next year and how to help me get a refund if I want. Thank you so much.