Whether you were for or against health care reform, there is no denying that the recently implemented Affordable Care Act (ACA or “Obamacare”) is something that will affect you during the coming tax season.
Even if you have been insured during the entire year, the IRS will require that you provide proof of insurance during your tax preparation in the coming year. This will increase the burden on tax preparers to retrieve documentation from the taxpayer in order to file your 2014 tax return. Be prepared upon filing that in order to complete any personal tax return, your accountant will require proof of health insurance coverage.
If you did not have insurance for the year, or had insurance for only a portion of the year, you may be subject to a tax penalty based upon your household income. The penalty for 2014 is the greater of $95.00 per adult ($47.50 per child), or 1% of your household income that is above the tax return filing status threshold for your filing status. This amount is prorated for the months that you were covered by the minimum health insurance coverage.
The vast majority of taxpayers will fall into the 1% penalty, which will be significantly larger than the $95.00 penalty that most individuals assume they will be hit with. The penalty continues to increase in 2015 and 2016 to “encourage” the un-insured to pursue health insurance from the marketplace or other provider. The penalty is capped at $3,600 per adult and $1,900 per child for 2014, and continually increases over the next two years. A family of four could be hit with a penalty as much as $11,000.00 for 2014!(Equivalent to the bronze plan premium for insurance coverage).
In order to avoid exorbitant tax penalties in the future, it is important to know when the enrollment periods are open to obtain health insurance. A recent poll indicated that 89% of registered voters were unaware of the open enrollment periods for the Marketplace. Here are the dates that you need to be aware of:
2015 Open Enrollment start November 15, 2014
2015 Open Enrollment Ends February 15, 2015
In future years the enrollment period will shift from October 31 to December 7. So make sure you are aware of the open enrollment periods and obtain health insurance to avoid this costly tax penalty.