Beginning with tax year 2020, the state of California requires residents and their dependents to obtain qualifying health care coverage, also referred to as Minimum Essential Coverage (MEC). Individuals who fail to maintain MEC for any month will incur an Individual Shared Responsibility Penalty unless they claim an exemption.
How is the penalty calculated?
The penalty will be the higher of either:
- Flat amount: based on the number of people in the tax household
- Pay $800 per adult and $400 per child
- Percentage of household income
- Pay 2.5% of the amount of gross income that exceeds the filing threshold requirements based on the tax filing status and number of dependents
The penalty for not having coverage is based on:
- The number of people in your household
- Your California state income
You will have to pay a penalty when you file your state tax return if:
- You did not have health coverage
- You were not eligible for an exemption from coverage for any month of the year
Are there any exemptions?
There are fifteen exemptions to the penalty, and three of them can only be granted by the Marketplace. The rest can be claimed on the tax return. If the taxpayer is indicating one or more coverage exemptions on Form 3853, don't choose one of these three unless the taxpayer has a corresponding Exemption Certificate Number (ECN) from the Marketplace or has a pending application for an ECN:
- General hardship (exemption code K)
- Members of certain religious sects (exemption code L)
- Coverage considered unaffordable based on projected income (exemption code M).
Do I qualify for any payment assistance?
Help may be available from the state for qualifying individuals and families through Covered California and is based on:
- Household size
What forms do I need?
The California procedures and forms in many ways closely resemble the forms that taxpayers and tax preparers have had to complete for the corresponding federal health insurance requirement since tax year 2014:
|Federal Form||California Form|
Part-year residents filing Form 540NR will need to indicate their health coverage status for the time period they were residents of California, reconcile any APAS received during their resident period, and indicate the nonresident exemption to the penalty for the nonresident months.
Full-year nonresidents filing Form 540NR, while not subject to the California MEC Individual Mandate, nonetheless are subject to the same reporting requirement as residents. Thus, a nonresident will need to complete Form 3853 and indicate the nonresident exemption to the penalty for the year.
What else do I need to know?
- Giving evidence of health care coverage, federal Form 8962, does not remove the requirement to file California Form 3849. The two California Forms 3849 and 3853 need to be completed as needed in addition to the federal forms.
- Only the information on Form 3895 is required to be entered in the tax return on Form 3849 for the purpose of reconciling APAS received versus PAS allowed. Federal Form 1095-A should not be used to complete Form 3849, since the PAS is in addition to the federal APTC.
- The California Marketplace is required to provide Form 3895 to the individual identified as the "tax filer" in the Marketplace enrollment application by January 31 of the year following coverage. If the taxpayer is expecting to receive Form 3895 and doesn't have it by early February, they should log into their account at Covered California.
- A return will include both Forms 3849 and 3853 if the taxpayer was covered by MEC for only part of the year.
- A taxpayer being claimed as a dependent on another tax return doesn't file either Form 3849 or 3853, and a return for such an individual won't show those forms in the California return menus in TaxSlayer Pro.
- An individual who otherwise wouldn't be filing either Form 540 or 540NR must file a return if any of these scenarios applies:
- they are taking PAS.
- APAS was paid to them or another individual in their household.
- they told the Marketplace that an individual was in their household, and no other tax return includes or will include that individual in their household.
Where do I make the entry in the program?
To complete Form 3853 or Form 3849, follow this navigation path:
- State Section
- CA Return
- Healthcare Coverage Forms
- Choose either the 3853 or 3849 form (use the information on form 3895 to complete form 3849)