Lying On Your Health Insurance Subsidy Application

It won't help in the long run

You'll get caught by the IRS if you lie on your application for a health insurance subsidy. Image © PhotoAlto/Eric Audras/Getty Images

Are you thinking about lying on your health insurance subsidy application so you’ll get a bigger subsidy or so you’ll qualify for a subsidy when you’re not eligible? Here’s why you shouldn’t.

  • You’ll get caught.
  • You’ll have to pay the subsidy back.
  • You may be guilty of fraud, a punishable crime.

How You’ll Get Caught for Lying About Your Income.

When you apply for a health insurance subsidy, your subsidy amount is based on an estimate of your income for the upcoming year.

The money the government sends to your health insurance company each month is actually an advanced payment of the tax credit you'd be eligible for when you file your tax return for that year. The real subsidy (ie, tax credit) doesn’t happen until you file your taxes in the early part of the following year.

When you file your taxes, you’ll have to disclose exactly how much money you really earned. It will be on your W2 and 1099 forms. The IRS will know how much you earned from your job and how much you earned from interest and dividends.

Next, you undergo a process called reconciliation. There, you’ll compare the amount of health insurance subsidy your health plan received on your behalf with the correct subsidy amount based on your actual income. If these amounts don’t match, you may have to pay back the extra money you got. 

If you try to get a bigger health insurance subsidy by lying about your income on your health insurance subsidy application, you’ll get caught when you file your taxes.

You'll have to pay the excess back.

And if a subsidy is being paid on your behalf each month and you then fail to file form 8962 with your tax return, your subsidies will be cut off going forward until you get the subsidy-reconciliation process completed. There's no getting around the fact that everything has to eventually be squared up with the IRS.

How You’ll Get Caught for Lying About an Offer of Job-Based Health Insurance.

You’re not eligible for a health insurance subsidy if your job offers health insurance that’s affordable and provides a minimum value. It’s your employer’s offer of insurance that makes you ineligible, not actually having the insurance coverage. So, even if you decline your employer’s coverage because you’d rather have a plan you can buy on your state’s health insurance exchange, as long as your employer offered affordable coverage, you’re ineligible for the premium tax credit subsidy.

What if you lie and say you weren’t offered affordable health insurance by your employer? You might be able to trick the exchange into giving your health plan the advance payment of a subsidy. But, the IRS will catch you, you’ll have to pay it back, and you'll have committed fraud.

Just like they send out W2s or 1099s each year, large employers now fill out a new tax form: form 1095-C. This form tells both you and the IRS whether or not you were offered health insurance, whether that health insurance provides minimum value, and how much that health insurance would have cost you. With this information, the IRS will know whether your employer’s offer would cost less than 9.66 percent of your household income, which is how the IRS determines whether the employer-sponsored health insurance was considered affordable (9.66 percent is the threshold for coverage in 2016; for 2017, the affordability cutoff is 9.69 percent of household income)..

If you’ve been fraudulently receiving an advanced payment health insurance subsidy all year long, form 1095-C will make it obvious that you weren’t eligible for that subsidy. You’ll have to pay it back. You could be guilty of fraud.

Just tell the truth.


Internal Revenue Service, Form 1095-C Employer-Provided Health Insurance Offer and Coverage Insurance. Accessed 6/3/16.

Internal Revenue Service, Revenue Procedure 2014-62. Accessed 6/3/16.

Internal Revenue Service, Revenue Procedure 2016-24. Accessed 6/3/16.

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