Did you know that you could end up paying at least $695 a year if you don’t get health insurance coverage this 2016?
That’s a fine the government sweetens up by calling it a “Shared Responsibility Payment” for individuals who qualify for health insurance but opt out of getting said insurance.
But the question remains: why is the government mandating that everyone in the US get health insurance in the first place?
Shared Responsibility Payments Explained
Before anything else, let’s talk about the fines that give many people, including our own accountants and tax preparers, a headache.
These fines were first implemented in 2014, where each qualified but uncovered adult would pay $95 and $47.50 for children (up to $285 per family) or 1% of the household income above your tax return filing threshold. You’d end up paying whichever of the two was greater.
That fine went up drastically in 2015, where qualified but uncovered adults would have to pay $325 and $162.50 for children (up to $975 per family) or 2% of the total household income beyond the tax return filing threshold. Again, whichever of the two is greater.
The biggest hit was just unveiled for this year though. Qualified but uncovered adults will pay $695 and $347.50 for children (up to $2,085 per family) or 2.5% of a household’s income above the tax return threshold. This rate will be maintained for 2017 onwards, with the flat rates increasing proportional to the inflation rate of each year.
You’ll end up paying a twelfth of the annual fines in federal taxesfor each month you don’t have health insurance. This means you can’t just game the system by getting insurance only when tax season comes rolling around the corner.
Exemptions for Shared Responsibility Payments
One of the reasons we recommend that you find a tax preparer is to help you determine if you’re exempted from having to pay up if you’re unable to acquire health insurance. Here are some of the more common exemptions that will help you avoid having to pay the fines:
Another thing you can do is create a marketplace account over on HealthCare.gov. Fill up the necessary information, and the system will notify you if you qualify for an exemption. We do, however, still encourage you to find a tax preparer to help you better understand your options. You may even qualify for catastrophic plans with lower premiums if your living conditions have taken a turn for the worse.
Why Do I Have to Pay A Fine For Not Getting Insurance?
This is one of the most common questions our tax professionals get when talking about healthcare-related issues.
To put it simply, the government is forcing more people to pay up in order to fund better and wider-reaching health insurance.
The rationale behind the Individual Mandate is that the federal government is trying to boost funding for providing universal healthcare. Without this extra funding, the government would go bankrupt due to the ambitious scale of its healthcare program – which includes providing coverage for people who used to be denied health insurance due to pre-existing health conditions.
By forcing qualified people to either get insurance or pay a stiff fine, the government hopes to spread some of the burden of funding expanded healthcare on to the uninsured taxpayer. Healthcare providers will see more people signing up for health insurance; allowing the providers to meet the expanded health insurance requirements set forth by the government.
You may or may not agree with the rationale behind the Individual Mandate, but it’s currently the law and is something that our accountants and tax professionals can help you better deal with.
The Premium Tax Credit
Not everything is all doom and gloom, though. There is this thing called the Premium Tax Credit (PTC), and it can help you get a little extra off if you qualify. The IRS has provided a handy yes-no list you can check to see if you meet its criteria for availing of the Premium Tax Credit.
In a nutshell, the PTC is meant to help low-income and moderate-income to afford health insurance. This covers individuals earning between $11,670 to $46,680, families of two earning between $15,730 to $62,920 and families of four earning between $23,850 to $95,400.
Those qualified for PTC can either refund the legible amount or they can credit it straight to their insurance companies to help lower monthly premium expenses. The problem here, however, are those with incomes nearing the upper limit as they may end up earning enough to not qualify for PTC but not enough to get complete health insurance coverage on their own.
You can find a tax professional for health insurance with us here at Rincon Controller and Tax Service. Just give us a call at (805) 259-5205, look for me, Elizabeth James, and I’ll help you learn more about your options when it comes to health insurance!
That’s a fine the government sweetens up by calling it a “Shared Responsibility Payment” for individuals who qualify for health insurance but opt out of getting said insurance.
But the question remains: why is the government mandating that everyone in the US get health insurance in the first place?
Shared Responsibility Payments Explained
Before anything else, let’s talk about the fines that give many people, including our own accountants and tax preparers, a headache.
These fines were first implemented in 2014, where each qualified but uncovered adult would pay $95 and $47.50 for children (up to $285 per family) or 1% of the household income above your tax return filing threshold. You’d end up paying whichever of the two was greater.
That fine went up drastically in 2015, where qualified but uncovered adults would have to pay $325 and $162.50 for children (up to $975 per family) or 2% of the total household income beyond the tax return filing threshold. Again, whichever of the two is greater.
The biggest hit was just unveiled for this year though. Qualified but uncovered adults will pay $695 and $347.50 for children (up to $2,085 per family) or 2.5% of a household’s income above the tax return threshold. This rate will be maintained for 2017 onwards, with the flat rates increasing proportional to the inflation rate of each year.
You’ll end up paying a twelfth of the annual fines in federal taxesfor each month you don’t have health insurance. This means you can’t just game the system by getting insurance only when tax season comes rolling around the corner.
Exemptions for Shared Responsibility Payments
One of the reasons we recommend that you find a tax preparer is to help you determine if you’re exempted from having to pay up if you’re unable to acquire health insurance. Here are some of the more common exemptions that will help you avoid having to pay the fines:
- Your income is below the tax filing threshold, therefore you don’t have to pay taxes
- Acquiring health coverage would cost you more than 8% of your household income per person
- Going less than three months without coverage
- You were actively denied Medicaid or CHIP
- Hardship exemptions (e.g. eviction, foreclosure, domestic violence, caring for sick family etc.)
- Being imprisoned
- Belonging to a religious organization that is against insurance, Social Security or Medicaid
- Being part of a federally recognized Native American tribe
Another thing you can do is create a marketplace account over on HealthCare.gov. Fill up the necessary information, and the system will notify you if you qualify for an exemption. We do, however, still encourage you to find a tax preparer to help you better understand your options. You may even qualify for catastrophic plans with lower premiums if your living conditions have taken a turn for the worse.
Why Do I Have to Pay A Fine For Not Getting Insurance?
This is one of the most common questions our tax professionals get when talking about healthcare-related issues.
To put it simply, the government is forcing more people to pay up in order to fund better and wider-reaching health insurance.
The rationale behind the Individual Mandate is that the federal government is trying to boost funding for providing universal healthcare. Without this extra funding, the government would go bankrupt due to the ambitious scale of its healthcare program – which includes providing coverage for people who used to be denied health insurance due to pre-existing health conditions.
By forcing qualified people to either get insurance or pay a stiff fine, the government hopes to spread some of the burden of funding expanded healthcare on to the uninsured taxpayer. Healthcare providers will see more people signing up for health insurance; allowing the providers to meet the expanded health insurance requirements set forth by the government.
You may or may not agree with the rationale behind the Individual Mandate, but it’s currently the law and is something that our accountants and tax professionals can help you better deal with.
The Premium Tax Credit
Not everything is all doom and gloom, though. There is this thing called the Premium Tax Credit (PTC), and it can help you get a little extra off if you qualify. The IRS has provided a handy yes-no list you can check to see if you meet its criteria for availing of the Premium Tax Credit.
In a nutshell, the PTC is meant to help low-income and moderate-income to afford health insurance. This covers individuals earning between $11,670 to $46,680, families of two earning between $15,730 to $62,920 and families of four earning between $23,850 to $95,400.
Those qualified for PTC can either refund the legible amount or they can credit it straight to their insurance companies to help lower monthly premium expenses. The problem here, however, are those with incomes nearing the upper limit as they may end up earning enough to not qualify for PTC but not enough to get complete health insurance coverage on their own.
You can find a tax professional for health insurance with us here at Rincon Controller and Tax Service. Just give us a call at (805) 259-5205, look for me, Elizabeth James, and I’ll help you learn more about your options when it comes to health insurance!
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