A few days ago we got an email from one of the big tax chains telling us how the Affordable are Act (a.k.a. Obamacare) was going to be a game changer next tax season. It said we should consider joining their team because their world class organization was going to be prepared to deal with the fallout.
This email contained a video with a tax preparer talking all this “mumbo jumbo” to a client who was convinced that he only had to pay a $95 penalty for not having health insurance. The reality is that many taxpayers think that is the case. They are DEAD wrong! In this post we wrote about how the ACA’s penalty worked, but figured it may be beneficial for you if we just gave a quick recap in this one.
The most misunderstood part of Obamacare is the individual mandate that every American not covered by Medicaid, Medicare, or health insurance must purchase health insurance or pay a penalty known as an “individual shared responsibility fee.” This penalty, however, has a number of exemptions that will permit numerous people to avoid actually paying the penalty. We’ll outline those exceptions in an upcoming post. Now back to the penalty…
For tax year 2014 the penalty is the GREATER of $95 per adult and $47.50 per child (up to a maximum of $285 per family) OR 1 percent of taxable income. For 2015 it is the greater of $325 per adult and $162.50 per child (up to a maximum of $975 per family) or 2 percent of taxable income. For 2016 it is the greater of $695 per adult and $347.50 per child (up to a maximum of $2,085 per family) or 2.5 percent of taxable income.
Thus, let’s say that you are single and make $100,000. Your penalty for tax year 2014 for not having health coverage will be $95 or 1 percent of your income; which would be $1,000 in this example. You can learn more on how the penalty is calculated and see further examples here.
Not every tax preparer keeps up with the law, nor will they be prepared to deal with this come next tax season. Also, many will struggle to explain to their clients WHY their refund suddenly decreased.
We, on the other hand, will be thoroughly prepared to deal with this. If you have an ACA related question, feel free to give us a call at 773-239-8850 or shoot us an email via the link below. Taking good care of OUR clients is just one of the ways we stay ahead of the competition!