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The December tax deadline you probably don’t know about

(Photo from Flickr used under Creative Commons license from user <a href="">401 (K 2012</a> )

Many taxpayers  are scrambling to take care of the usual list of tax chores to finish before year’s end, but there’s one little known tax deadline they’re probably forgetting.

December 15 (also known as Monday) is the last day for choosing a health plan on the new Obamacare insurance exchanges for people who want coverage by Jan. 1. Those who ignore the deadline and go without health insurance could see their tax bills grow by hundreds or thousands of dollars.

That’s because the penalty for not having health insurance will be added to people’s tax bills or subtracted from their tax refunds. Many people who didn’t have insurance this year will see these penalties show up on their tax returns for the first time when they start preparing their 2014 taxes in the spring. (The fee for not being covered this year is $95 per person or roughly 1 percent of household income. Next year it grows to $325 per person or roughly 2 percent of household income.)

Now some people who are confused about the deadline for signing up risk having to pay the penalty for 2015 as well. Anyone who doesn’t sign up by Monday won’t have insurance until Feb. 1 at the earliest. But they still have a chance to avoid the penalty for 2015.

The final, final deadline for buying insurance for next year — and for avoiding the penalty — will be Feb. 15. Anyone who doesn’t sign up by then will have to wait until the next open enrollment period starts in the fall — and will go without insurance for the rest of 2015.

“On Feb. 16 it will be too late, says Kathy Pickering, executive director of The Tax Institute at H&R Block. “So it’s important to get in early.”

People who change jobs, get married, have children or face another qualifying life event may be eligible for a special enrollment period that will give them another chance to sign up for coverage. Some people will also qualify for exemptions that will let them avoid the penalty altogether.

While 62 percent of people without insurance generally know that they could face a penalty, there is a lot of confusion about how the penalty will be applied and what people need to do to avoid it, according to a survey from TurboTax. Some 87 percent of the uninsured people polled by the online tax preparation company in November said they didn’t know the deadline for avoiding the 2014 tax penalty had passed.

“Despite all the talk of Obamacare, the lack of knowledge is astounding,” says Bob Meighan, a vice president at TurboTax.


Medical debt is ruining the credit score of millions of Americans

How to make sure you don’t chose the wrong health plan this open enrollment season

The small change that can save you thousands of dollars a year in health costs

7 things you can do now to lower next year’s tax bill