IRS Reminds Individuals of Health Care Choices for 2014
Posted by William Byrnes on March 28, 2014
In Issue Number HC-TT- 2014-01, the IRS released reminders for Individuals about the 2014 Health Care Choices. In 3 days, on March 31, the Heath Care Market Exchange enrollment period will close.
Starting in 2014, each person must choose to either have basic health insurance coverage (known as minimum essential coverage) for everyone in the family for each month or go without health care coverage for some or all of the year.
If a person don’t maintain health insurance coverage, then that person will need to either seek an exemption or pay a penalty (called an “individual shared responsibility payment”) with the 2014 income tax return filed in 2015.
What Qualifies as Health Insurance to Avoid the Penalty?
Qualifying coverage includes:
- health insurance coverage provided by your employer (including COBRA and retiree coverage),
- health insurance coverage purchase through a health care exchange Marketplace,
- Medicare, Medicaid or other government-sponsored health coverage including programs for veterans, or
- coverage you buy directly from an insurance company.
Qualifying coverage does not include certain coverage that may provide limited benefits, such as coverage only for vision care or dental care, workers’ compensation, or coverage only for a specific disease or condition.
Premium Tax Credit May Help Pay for Health Insurance
If purchasing health insurance coverage through the Marketplace, the person may be eligible for financial assistance including the premium tax credit, which will help lower the out-of-pocket cost of your monthly insurance premiums (see yesterday’s blog article).
If a person chooses to go without coverage or experiences a gap in coverage, the person may still qualify for an exemption based upon (1) not having access to affordable coverage, (2) the gap is less than three consecutive months without coverage, or (3) qualifying for one of several other exemptions. A special hardship exemption applies to individuals who purchase their insurance through the Marketplace during the initial enrollment period but due to the enrollment process have a coverage gap at the beginning of 2014.
Penalty for Not Having Health Insurance
If a person (or any of dependents) do not maintain coverage and do not qualify for an exemption, then the person will owe a penalty, called a “individual shared responsibility payment”, paid when filing the tax return in 2015. In general, the payment amount is either a percentage of household income or a flat dollar amount, whichever is greater.
The person will owe 1/12th of the annual payment for each month you (or your dependents) do not have coverage and are not exempt. The annual payment amount for 2014 is the greater of:
- 1 percent of household income that is above the tax return filing threshold for the filing status, such as Married Filing Jointly or single, or
- A family’s flat dollar amount, which is $95 per adult and $47.50 per child, limited to a maximum of $285.
The penalty is capped at the cost of the national average premium for the bronze level health plan available through the Marketplace in 2014.
Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction. For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.