Get ready for the new 2014 tax return, including the tax provisions of the Affordable Care Act (ACA): individual shared responsibility provision, minimum essential coverage, shared responsibility payment
The penalty, called the “individual shared responsibility payment,” went into effect in 2014 after being activated by the Affordable Care Act (ACA). This payment must be calculated on an individual’s Form 1040 federal income tax return for anyone in the household who didn’t have coverage, including the taxpayer, the spouse if a joint return is being filed and dependents claimed on the return.
The payment is the greater of either a percentage or a flat dollar amount, and is capped to prevent people from paying a higher penalty than coverage would have cost. In 2014, each uninsured person would pay the greater of 1% of the income shown on the tax return or a flat dollar amount of $95. For anyone under 18, the penalty is only $47.50. For a family, there’s a maximum flat dollar amount of $285. The cap is the national average premium a family would pay for a bronze plan offered through the exchanges
The penalties rise over time, so the 1% of income penalty in 2014 increases to 2.5% of income in 2016.
The requirement to either pay for coverage or the penalty doesn’t apply to the people in these categories:
- Those whose premiums for self-only coverage in 2014 exceed 8% of household income (adjusted based on inflation to 8.05% for 2015, with further adjustments to be made in subsequent years)
- Those whose income is lower than the income tax return filing threshold
- Incarcerated individuals
- Indian tribe members
- Those who oppose accepting health care insurance due to religious beliefs
- Members of a health care sharing ministry who share ethical or religious beliefs,
and medical expenses
What new forms may be used to prepare the return?
Form 1095-A,Health Insurance Marketplace Statement
Form 8962,Premium Tax Credit, & Instructions
Form 8965,Health Coverage Exemptions & Instructions
What publications may be useful?
Publication 17-Your Federal Income Tax (For Individuals)
Publication 974-Premium Tax Credit
Publication 5172 – Flyer, Facts about Health Care Coverage Exemptions
Publication 5185 – Flyer, Facts about making a shared responsibility payment
Publication 5152 – Flyer, Premium Tax Credit – Report changes in circumstances
Publication 5156 – Flyer, Facts about Individual Shared Responsibility provision
Publication 5120 – Flyer, Facts about the Premium Tax Credit
Publication 5121 – Brochure, Facts about the Premium Tax Credit
Publication 5093– Healthcare Law Online Resource The RS resource page
on IRS.gov/aca is routinely updated as new publications are issued