Tax Deadline Looms Near – Are You Ready to Report Your Health Care Coverage?

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health taxThe IRS wants to know if you are covered with health insurance.

They are calling it “The Individual Shared Responsibility Provision” and in this division every person in the United States is required to either have minimum essential health care coverage for each month of the year or qualify for an exemption or make a payment with your federal income tax return.

Are you prepared to pay this “tax” which is actually a fine, or show proof that you are insured?

The deadline is very near and many people who have already filed did so not realizing that they may have needed to include a form 8885 if they paid premiums for health insurance.

If you have no health insurance yet (March 31st was the deadline) then prepare for the IRS to be enforcing a fine.

In the second column of page 18, of the IRS form from the United States Government Printing office found in the Federal Register /Vol. 78, No 169/ Friday, August 30, 2013/ Rules and Regulations 53663 and can also be located online by going to the paragraph headed “Individual Shared Responsibility Provision” and choose to open “final regulations” link at this site – http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions  it says the following, and I quote the government:

“Example 3. Family without minimum essential coverage. (i) In 2016, Taxpayers H and J are married and file a joint return. H and J have three children: K, age 21, L, age 15, and M, age 10.  No member of the family has minimum essential coverage for any month in 2016. H and J’s household income is $250,000. H and J’s applicable filing threshold is $24,000. The annual national average bronze plan premium for a family of 5 (3 adults, 2 children) is $15,000. (ii) For each month in 2016, under paragraphs (b)(2)(ii) and (b)(2)(iii) of this section, the applicable dollar amount is $2,780 (($695 x 3 adults) +(($695/2) x 2 children)). Under paragraph (b)(2)(i) of this section, the flat dollar amount is $2085 (the lesser of $2,780 and $2,085 ($695 x 3)). Under paragraph (b)(3)of this section, the excess income amount is $5,650 (($250,000 – $24,000) x 0.025). Therefore, under paragraph (b)(1) of this section, the monthly penalty amount is $470.83 (the greater of $173.75 ($2,085/12) or $470.83 ($5,650/12)), (iii) The sum of the monthly penalty amounts is $5,650 ($470.83 x 12). The sum of the monthly national average bronze plan premiums is $15,000 ($15,000/12 x 12). Therefore, under paragraph (a) of this section, the shared responsibility payment imposed on H and J for 2016 is $5,650 (the lesser of $5,650 or $15,000)”

Now if you understand all of that then you can see that the government figures that the cost for a family of five to have essential insurance coverage is $15,000 a year.

They use as an example a family whose income is $250,000 a year which is greater than what most people make.

This also refers to the year of 2016, which is two years away.  However the fines begin this year.

In the same above document under section 1.5000A-4 Computation of shared responsibility payment on page 17, 3rd column it reads:

(a) In general. For each taxable year the shared responsibility payment is the lesser of—(1) The sum of the monthly penalty amounts for each individual in the shared responsibility family; or (2) The sum of the monthly national average bronze plan premiums for the shared responsibility family. (b) Monthly penalty amount – (1) In general. Monthly penalty amount means, for a month that a nonexempt individual is not covered under minimum essential coverage, 1/12 multiplied b the greater of–  (i) The flat dollar amount; or (ii) The excess income amount. (2) Flat dollar amount—(i) in general. Flat dollar amount means the lesser of–  (A) The sum of the applicable dollar amounts for all individuals include in the taxpayer’s shared responsibility family; or (B) 300 percent of the applicable dollar amount (determined without regard to paragraph (b)(2)(iii) of this section) for the calendar year with or within which the taxable year ends. (ii) Applicable dollar amount. Except as provided in paragraphs (b)2)(iii) and (b)(2)(iv) of this section, the applicable dollar amount is—(A) $95 in 2014; (B) $325 in 2015; or (C) $695 in 2016.

Basically, this year you can expect a penalty of $95 per adult and $47.50 per child with no more than $285 to be paid out per household, or if greater, a penalty of 1 percent of your adjusted gross income after personal exemptions and standard deductions.

So if you are a married couple filing jointly and you have an AGI (adjusted gross income) of $50,000 minus the $20,000 standard deduction, the penalty is assessed on $30,000 x 0.01 which means you have a $300 penalty.

So now it all begins, we are fined and punished for our failure to purchase.

This is no tax. This is a penalty, a deprivation of freedom under the disguise of shared responsibility.