Tax season can always be stressful, and now the effects of the Affordable Care Act (ACA) add another element to be considered. This year’s tax season is the first time filers will be asked to provide basic information about their health care coverage.
The ACA, or Obamacare as it is sometimes referred to, uses tax laws to encourage signing up for medical coverage through health care insurance marketplaces. The ACA contains tax credits for those who purchased medical insurance through a marketplace and a penalty for those without coverage. Some taxpayers might qualify for an exemption from the requirement to have coverage.
The Obama Administration created a special enrollment period for this year only. It allows those subject to the penalty for 2014 ($95 per adult or up to 1 percent of their income, whichever is greater) to purchase coverage on an exchange before April 30. This will prevent having to pay the penalty (also known as a shared responsibility payment) again next year. The fee for 2015 is expected to be $325 per adult or 2 percent of income.
The penalty is supposed to encourage people to enroll, but there are timing issues. If open enrollment ends in February (like this year) or in January (which is a White House proposal for next year), the penalty’s incentives diminish. For example, if you file your taxes in March and discover you need to pay a penalty because you are uninsured, you also learn you will most likely owe another higher penalty for 2015. For most people, this cannot be avoided unless they find a job with medical benefits or qualify for Medicaid.
The Winters Law Firm handles tax planning as well as all aspects of estate administration. I help individuals, families and businesses plan for the future and preserve assets.