Individual Shared Responsibility Payment or Penalty

March 10, 2014

The penalty is called the “individual shared responsibility payment” and must be paid by you and any dependent included on your tax return who does not meet the above mandates for any month of 2014.

The Affordable Health Care Act mandates that you and your family must have qualifying health insurance coverage by April 1st of this year or qualify for an exemption.  If you don’t meet either of those criteria, you’ll have to make a payment (which is also referred to as a penalty) in 2015 when you file your 2014 federal income tax return.

ACA in washingtonThe payment is called the “individual shared responsibility payment” and must be paid by you and any dependent included on your tax return who does not meet the above mandates for any month of 2014.

A person may be exempt from paying the penalty if the minimum payment for annual premiums is more than 8% of annual income, if a gap in coverage is less than three consecutive months, or a hardship excludes a person from obtaining coverage (which is supposed to qualify that person for government-sponsored care).  Recently regulators also have added an exemption from the penalty if the initial enrollment period for a Marketplace purchase caused a gap in coverage.

The payment amount is either a flat rate per person or a percent based on income, whichever is greater.  It is capped at the cost of the average annual premium of a bronze-level plan purchased on the Marketplace.

Generally, the law states you would owe a penalty of 1/12th of the annual health insurance premium payment for each month you and/or your dependents do not have coverage.  As the Marketplace is still in flux, the 2014 annual payment amount is figured on 1% of your household income that is above the tax return threshold for your filing status or a charge per person of $95 per adult, $47.50 per child limited to no more than $285, whichever is greater.

Please Note:  This issue is being hotly debated and a Presidential executive order may change the amounts and timing of the payments.  The amounts shown in this blog are numbers currently provided online by the IRS.  Be watching for additional information on this blog in the next few days featuring direct links to the most detailed and most up-to-date information on ACA Tax Provisions for both individuals and businesses.

If you have questions, please don’t hesitate to contact us at McRuer CPAs.