As the law stands today (February 18, 2017), technically yes, you would have to pay a tax penalty if your wife did not have conforming healthcare coverage for the 2016 tax year, or did not have a valid exemption from having such coverage. However, the law in this area is in a great deal of flux at the present time, and so please continue reading this answer for additional information and a possible suggestion.
At the present time (February 18, 2017), the IRS indicates that taxpayers do not have to fill out
the heath care questions on their federal income tax returns, although they may
still want to do so voluntarily, depending on their circumstances, such as to claim a premium-paid tax credit for having a marketplace insurance plan.
It is also important to remember that as of today, the underlying statutory law of the
Affordable Care Act (a.k.a. Obamacare) providing tax penalties for not
having health insurance; the system of exemptions to not having health
insurance; and the tax credit system set up for purchasing health
insurance through an authorized marketplace state health care exchange,
all remain in place.
However, what has recently changed is an executive (i.e.,
Presidential) order directing the IRS to go ahead and process
individual income tax
returns, where the heath insurance coverage box is left unchecked.
This
is different than the situation which existed prior to the order, and
different than last year, where the IRS was sending such tax returns
straight
back to taxpayers as being "incomplete." You can read about TurboTax's
official interpretation of President Trump's executive order, and the
penalties for
not having health insurance for the 2016 tax year, both at the
following
(2) TurboTax webpages:
https://ttlc.intuit.com/questions/3662774
https://ttlc.intuit.com/questions/2581044
In addition, this area of the tax law is highly uncertain, so please keep monitoring the situation carefully.
It also seems likely that there will be further significant changes to heath
care and insurance, especially as it impacts the tax code and penalties /
credits, going forward.
For the moment, the above information
accurately describes the present state of the relevant tax law and rules
(as of 02-18-2017).
With all of that explained, and given the facts about your wife's lack of health insurance for this tax year, one possible tax strategy may be to do the following. Wait until after TurboTax releases a software program patch for the health care law changes, which should happen soon (we are actively working on it). Then, go ahead and file your federal tax return, leaving the health insurance information (for your wife, anyway) blank.
The IRS will accept such a tax return, according to their new policy. Although current law says that you would have to pay a tax penalty because of your wife's lack of insurance, you could effectively "take a chance" that either the IRS won't assess such a penalty, or that the law may have changed again by that time, so that a penalty is never assessed. The worst that could happen under this scenario is that you'd have to pay a tax penalty, and the processing of your 2016 tax return would be significantly delayed (as well as any expected refund). The best case scenario here is that you might conceivably escape the health care tax penalty altogether. Your obvious alternative would be to simply file your federal return now and pay the tax penalty.
This strategy would involve a gamble, yes. But it would not be an illegal one, or a wrong one to take under the law as of the day you file the tax return (which is the standard applied). As a CPA, it might be a tax strategy that I could reasonably see offering to a client, purely as an option. As has hopefully been made clear, it would not be unlawful (under the present tax laws, executive orders, and circumstances) to take such a chance, while the outcome is gray on this subject . . . just as long as you are fully aware of the potential risks and costs involved before you enter into it.
Thank you for your very timely question.
Yes
No
