FOR 2014, YOU MUST WAIT FOR THE FORM 1095-A FROM THE MARKETPLACE BEFORE YOU FILE YOUR INCOME TAX RETURN!!
The employer mandate has been delayed until 2015 but the individual mandate is still in effect and begins January 1, 2014. This mandate requires any individual to hold minimum essential health coverage, unless the individual is exempt. Anyone who cannot afford health coverage or whose income is below the filing status threshold are exempt from this mandate, as those who have employer-provided health coverage or coverage provided by a state or federal marketplace, Medicaid, Medicare etc.
Beginning in 2014, the Affordable Care Act (ACA) includes an individual mandate for most individuals to have health insurance or potentially pay a penalty for noncompliance. Individuals will be required to maintain minimum essential coverage for themselves and their dependents. Some individuals will be exempt from the mandate and the penalty, while others may receive financial assistance to help them pay for the cost of health insurance coverage and the costs associated with using health care services.
Those who do not meet the mandate may be required to pay a penalty for each month of noncompliance. The penalty will be calculated as the greater of either:
- One percent of the “applicable income,” defined as the amount by which an individual’s household income exceeds the applicable filing threshold for the applicable tax year, or
- a flat dollar amount assessed on each taxpayer and any dependents (e.g., family)
- The filing threshold comprises the personal exemption amount (doubled for those married filing jointly) plus the standard deduction amount (not the itemized amount).
- the percentage will be 1.0% in 2014, 2.0% in 2015, and 2.5% thereafter
- the basic annual flat dollar amount phased in for an individual filing single—$95 in 2014, $325 in 2015, and $695 in 2016 and beyond (adjusted for inflation),
The flat amount penalty will be increased for each person in the family (½ for those under age 18). There is a ceiling on the flat amount equal to three times the basic amount. Thus, in 2016, as an example, the maximum flat amount would be $2,085. Additionally, the penalty cannot exceed the cost of the “bronze level” insurance plan, or $2,448.
To assist with the cost burden of having insurance, the Affordable Care Act provided the premium tax credit. Essentially, this credit is actually an advance payment to help lower the cost of premiums. This premium credit is used to help eligible taxpayers purchase insurance through the state exchanges and is based on the taxpayer’s household income and the federal poverty line. The credit will generally be available to individuals (single or joint) with household incomes between 100 and 400 percent of the federal poverty level for the family size involved.
The presumption is the IRS will send out notices to all eligible individuals instructing the taxpayer to respond by indicating whether he or she would like all, some or none of the advanced payment as calculated.
YOU MUST WAIT FOR THE FORM 1095-A FROM THE MARKETPLACE BEFORE YOU FILE YOUR INCOME TAX RETURN!!
TIP: If you receive a letter from the IRS, be careful how you respond because your decision could result in an unexpected liability or tax due when you file your 2014 income tax.