KEY PART OF HEALTH REFORM TAKES EFFECT JAN 1:
Individuals without insurance will owe a tax.
Although the Obama administration delayed to 2015 the rule that firms with 50 or more full-time employees must provide affordable health insurance to workers or pay a stiff fine, the individual mandate’s start date wasn’t deferred, despite a push for this by the GOP.
Now IRS has issued rules on when this tax applies.
Folks must have minimum essential coverage for themselves and their dependents to avoid the tax.
This includes coverage provided by an employer that meets minimum federal requirements, coverage purchased through an exchange and federal coverage such as Medicare, Medicaid, Tricare and veterans coverage.
Several groups of people are exempted from the individual mandate:
1) Individuals for whom coverage is too expensive.
If an employee is eligible for coverage but his or her share of the premium exceeds 8% of the household’s AGI, the penalty tax doesn’t apply. Ditto for folks who are eligible for employer coverage if the cost of a basic bronze-level plan in an exchange, less any federal tax credit for buying insurance, exceeds 8% of the household’s AGI. Members of households where total income is below the level needed to file a tax return also are exempted.
2) Filers who go without coverage for periods of less than three months.
3) People who can show that a hardship forced them to go without coverage.
4) And members of religious groups opposed to private or public insurance.
The tax for being uninsured is normally the higher of two amounts:
The basic penalty or an income-based levy.
The basic penalty is $95 a person for 2014 ($47.50 for each family member under the age of 18), with a $285 ceiling. The income-based penalty is 1% of the excess of the taxpayer’s household’s AGI over the minimum level of AGI needed to trigger filing a tax return. In either case, the tax is reduced proportionally for any months that the taxpayer had coverage.
Both of these levies are scheduled to be significantly higher in 2015 and 2016.
But in no case can the tax exceed the cost of a bronze-level exchange plan
For the taxpayer and family members, also adjusted for months with health coverage.
The tax is paid annually on the 1040. So 2014’s levy is paid in early 2015.
The Service is going to have a hard time policing the tax penalty for 2014.
Employers are supposed to send IRS a report with details about employee coverage so the agency can determine who is uninsured and check whether the penalty is paid. But when the administration delayed the start date of the employer mandate to 2015, it also made employer reporting voluntary for 2014. As a result, the Revenue Service will not have completely accurate data on people who are going without coverage.
And IRS’ enforcement remedies are limited to collect the tax. It is barred from filing a lien or levying a person’s assets, so it’s allowed only to offset tax refunds to collect the penalty. Nor can it charge interest on the unpaid balance of the tax.
*taken from www.kiplinger.com
