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ACA: Individual Responsibility Payment

The March 31, 2014 deadline for individuals and families to obtain required health care coverage to avoid being penalized has passed. The penalty to be assessed as part of the taxpayers 2014 tax return will be the greater of:.

  • 1 percent of your yearly household income. (Only the amount of income above the tax filing threshold, $10,150 for an individual, is used to calculate the penalty.) The maximum penalty is the national average monthly premium for a bronze plan based on individual factors.
  • $95 per person for the year ($47.50 per child under 18). The maximum penalty per family using this method is $285.

The penalty increases every year. In 2015 it will be 2 percent of your income or $325 per person. In 2016 it will be 2.5 percent of your income or $695 per person, and then it’s adjusted for inflation in subsequent years.If you obtain qualified insurance after the March 31,2014, the penalty is calculated as 1/12 of the yearly penalty times the number of months the person was not insured. If you were uninsured for three months or less out of the year, then there is no penalty.

Insurance was required to be obtained through the Marketplace exchange. While the open enrollment period for getting insurance through the Marketplace is closed, people can still obtain insurance on their own through their employers or through private entities. Employer plans must offer minimum coverage for all full-time employees if the company has at least 50 employees. The next open enrollment period begins Nov. 15, 2014, which will incur a penalty for not being insured from March through October.

Some individuals may qualify for the special enrollment period while the Marketplace is closed. The special enrollment period is 60 days following a “qualifying life event.”

There are people who are exempt from the individual responsibility payment. Exemptions are given for the following reasons:

  • You were uninsured for less than three months;
  • The lowest-priced coverage available to you would cost more than 8 percent of your household income;
  • You don’t have to file a tax return because your income is less than the filing requirement limit;
  • You’re a member of a federally recognized tribe or eligible for services through an Indian Health Services provider;
  • You’re a member of a recognized health care sharing ministry;
  • You’re a member of a recognized religious sect with religious objections to insurance, including Social Security and Medicare;
  • You’re incarcerated, and not awaiting the disposition of charges against you; or
  • You’re not lawfully present in the U.S.

There are also several hardship exemptions for people in situations where they are unable to purchase health insurance. Qualifying individuals will need to fill out an exemption application on healthcare.gov.

Clients who have obtained healthcare coverage through the Marketplace may be eligible for a Premium Tax Credit. This tax credit is to make purchasing health insurance more affordable for people with moderate incomes. According to irs.gov, you are eligible if you:

  • buy health insurance through the Marketplace;
  • are ineligible for coverage through an employer or government plan;
  • are within certain income limits;
  • cannot be claimed as a dependent by another person.

Individuals who qualify can choose to get the credit now and have it sent directly to their insurance company, or claim the full amount when they file their 2014 or 2015 tax return.