Obamacare Tax Penalties

No one enjoys paying taxes, but it’s even harder to pay taxes you are not required to pay.

If you haven’t signed up for Obamacare and you are a family of four (married with two children), you are looking at a penalty of $285 for tax year 2014, and it gets worse.

If you do not buy insurance by the end of 2015, your tax penalties could skyrocket to $2085.

But there is good news for the vast majority of tax payers. Intuit the makers of TurboTax, estimates that more than half of the 40 million people who lacked insurance in 2014 may be exempt from the tax penalty.

Unfortunately, many of those same people will likely not even be aware the waiver exists. There many conditions which allow a taxpayer to get a waiver for 2014. They vary in degree and include all kinds of conditions including being a Native American, homelessness, domestic violence, bankruptcy, property damage, and a number of other hardships which would affect your ability to find and pay for your family’s insurance.

The Affordable Care Act (Obamacare) requires nearly all Americans to have health coverage. If you do not sign up, you pay a tax penalty. Qualifying coverage can be obtained from your place of employment or other job-based insurance, private health plans, plans purchased from government-run exchanges, Medicare or Medicaid.

The penalty for not having coverage for 2014 was $95 per adult and $47.50 per child, or 1 percent of taxable income – whichever is lowest. Next year, the tax penalties jump to $325 per adult and $162.50 per child or 2 percent of household income – whichever is lowest. And, in 2016, the penalty rises again to $695 for adults, $347.50 for kids, or 2 ½ percent of household incomes.

The experts, working with data from the Congressional Budget Office, predict the average penalty for uninsured taxpayers – for the 2014 filing year – will be $301. They also predict that average will increase to $588 for the 2015 tax year.

Turbo Tax claims that 55 percent of the people who use their online exemption checker qualify for the exemption. But many who would qualify for the exemption are not even aware there is an exemption. In fact, a recent survey by the Trans America Center for Health Studies reveals that, compared with earlier in 2014, more are saying they aren’t even sure if the Affordable Care Act mandate applies to them.

The confusion about how Obamacare works is multiplied among the uninsured underscores existing concerns among ACA advocates, who have warned that signing up remaining uninsured people will be harder in the second season of Obamacare than in the first.

The THCS survey found that nearly 20 percent of those polled claimed they, “did not know how to apply” when asked in November why they didn’t obtain Obamacare health coverage last year, twice as many as offered the same response last July.

Ten percent of those polled claimed it was because they were “not sure the insurance mandate applied” to them. So, realistically, if 20 percent of the uninsured do not even understand the law itself, how much of a chance do they have of finding and utilizing a condition which might save them several hundred dollars?

The main issue is certainly a lack of awareness. With an already mind-boggling tax code, Obamacare adds a new level of complexity this year as all taxpayers must disclose whether they had health coverage throughout 2014. A recent survey pointed out that “almost half of the taxpayers are unaware they are required to report their health insurance” status.

There are spanking new forms for people who did not insured to help figure their penalty and yet another form for the low or moderate income filers who are recipients of federal tax credits to help pay for their insurance.

Some people will owe the government money, and others stand to see a refund if there has been any marked change in their income since first being approved for subsidies.

The Obama administration on Friday released tools to help people calculate their tax returns while factoring in the new rules related to Obamacare.

The US Health and Human Services Department says it will directly contact people who enrolled in Obamacare plans to offer “personalized service relevant to their tax status.”

Major tax preparation organizations are focusing on the new wrinkles of Obamacare as part of their ongoing marketing strategies and enhanced services. Jackson Hewitt states they are prepared “to offer clients free assistance identifying health-care options. TurboTax claims their software “includes ACA compliance for no extra charge,” and H&R Block says it expects 25 percent of their customers will file forms related to Obamacare, for which the company will charge an extra fee.


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By |2015-01-20T13:50:12+00:00January 20th, 2015|Blog|0 Comments

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