Tax Penalties on Tax Day

Today is Tax Day, April 15th. It’s not a day we tend to think about health insurance, but now we will. The Affordable Care Act (ACA or “Obamacare”) states that most Americans with income exceeding the federal poverty line are required by law to have health insurance as of 2014. If you did not sign up for health insurance last year, you may be forced to pay a fine on your 2014 taxes, either through an additional charge or a reduction in your tax return. The tax was not designed to punish people, but rather, to incentivize everyone to get health insurance. It could bring down insurance costs for everyone if there are more healthy people purchasing insurance. However, the government realizes that you may not be able to afford insurance, so you may be able to qualify for a subsidy to pay for health insurance or an exemption to paying the tax because of hardships. Here we break down how much you can expect to pay in tax penalties, available ACA deadline extensions, and the many exemptions you may qualify for.

How Much Are ACA Tax Penalties For Not Having Health Insurance?

How much you are fined will vary depending on a number of factors, including your income, number of dependents, and amount of time you were uninsured. 2014 is the first year tax penalties for uninsured individuals were mandated, therefore fines are starting out lower and will increase annually.

Penalties in place for the 2014 tax year include:

-1% of your total household income or $95 per uninsured adult-whichever is greater; fines may reach up to $285 per family, and $47.50 per uninsured child.

Penalties in place for the 2015 tax year are expected to increase to:

-2% of your total household income, or $325 per uninsured adult–whichever is greater; the fine per uninsured child may reach up to $162.50.

In 2016, this amount is expected to increase once again, and every year thereafter in accordance with the rate of inflation.

The Tax Policy Center has created a quick input survey you can fill out to find out around how much you will have to pay in fines: click here to fill out the quick questionnaire.

Do You Still Owe A Tax Penalty If You Had Health Insurance For Part Or Most Of 2014?

As mentioned earlier, the amount you are fined relates to how long you were uninsured throughout 2014. If you lacked health insurance coverage for two consecutive months or less, this is considered a “short gap” and you will not be fined.

If you were uninsured on and off throughout the year, or have more than one “short gap” on your record, the exemption only applies to the first gap. Every gap in coverage thereafter is eligible to be fined.

ACA Deadline Extension

If you missed the deadline to sign up for health insurance and owe a penalty on your 2014 taxes, the government has granted another ACA deadline extension. The extension period started on March 15 and extends through April 30. This “special enrollment period” is intended to help the estimated 6 million individuals who recently learned of the tax penalty after preparing their taxes.

Health Care Coverage Exemption

According to Healthcare.gov, there are a number of exemptions that may disqualify you from receiving a penalty even if you are uninsured. Each exemption listed below includes a link to the appropriate healthcare.gov page for more information.

Income-related Exemptions:

-If the cheapest coverage offered through the Marketplace or job-based plan exceeds 8% of your total household income.

-You don’t need to file a tax return because your total income is below the legal limit requiring you to file.

Health Coverage-related Exemptions:

-You were not uninsured for more than two consecutive months.

-Even if you had no insurance coverage in January, February, March and April, as long as you purchased coverage by the date May 1, 2014 you may be safe.

-You qualify for Medicaid but live/lived in a state that did not expand its Medicaid program.

-Your child was not insured earlier in the year, but you enrolled them in the Children’s Health Insurance Program during the 2014 Open Enrollment period

-You were covered for limited services through Medicare or TRICARE.

-You did not accept a job-based plan slated to start in 2013 and end in 2014.

-You had healthcare coverage through AmeriCorps, National Civilian Community Corps (NCCC), or VISTA

Group Membership Exemptions:

-You belong to a federally recognized tribe, or you are eligible for services provided by Indian Health Services.

-You belong to a federally approved health care sharing ministry.

-You belong to a federally recognized group with religious objections to insurance.

Other Exemptions:

-You were serving time in jail or prison.

-You were living abroad, or not “lawfully present”.

Hardship Exemptions:

-You were homeless in 2014.

-You were evicted or facing foreclosure within the last 6 months.

-Your utility company has sent you a shut-off notice.

-You are a recent victim of domestic violence.

-You recently lost a loved one due to death.

-You experienced a natural or human-cased disaster, including fire, flood, etc.

-You filed for bankruptcy within the last 6 months.

-You have substantial debt due to unaffordable medical expenses incurred within the last 24 months.

-You have been caring for an ill, disabled or aging family member.

-Someone else is required by law to pay for your child’s insurance coverage.

If you faced any of the above hardships, or a different hardship that may have prevented you from obtaining health insurance throughout 2014, click here to locate the appropriate hardship exemption forms you will need to fill out.

Make sure and sign up for health care coverage as soon as possible to prevent paying even higher tax penalties next year!

The Year in Personal Finance

The year 2013 is drawing to a close. Let’s take a look at some of the major highlights.

New Insights

Helaine Olen exposed the dark side of financial advisory services with Pound Foolish: Exposing the Dark Side of the Personal Finance Industry. We learned about smarter spending strategies from Dr. Elizabeth Norton and Harvard professor Michael I. Norton who co-authored Happy Money: The Science of Smart Spending. Malcolm Gladwell published another gem, David and Goliath: Underdogs, Misfits, and the Art of Battling Giants, which taught us about using perceived disadvantages to defeat giants.

Rise of the Machines

There was a lot of talk about Bitcoin in 2013. The coverage and demand for the cryptocurrency hit a fever pitch this year. Bitcoin prices crashed 50% after China decided to officially disallow the currency. Bloomberg began covering the currency and actively tracked the real-time price. In other news, the cryptocurrency, Dogecoin, experienced a mass theft.

Applebees decided to start using Tablets, e.g., iPads, etc., in their restaurants. The word is that they won’t replace waiters but the reality is that this is a prime opportunity to replace workers and save money. Delivery from Above! Private sector companies Fedex and UPS couldn’t deliver this Christmas but Amazon plans to use drones for same-day delivery in the near future.

The Year of the Manufactured Crisis

This has been the least effective US Congress EVER based on the stats and polling. Let’s see…this Congress brought us the Fiscal Cliff, several debt ceiling threats, Sequestration, and a Government Shutdown. The Affordable Care Act website was launched with many major glitches. The first Government Shutdown in over 17 years resulted in an unpaid cost of $25 Billion. Moreover, extended unemployment benefits beyond the normal 26 weeks ended as of December 28, 2013. Extending unemployment would cost approximately $19 Billion.

House Republicans are against extending unemployment insurance because it’s not paid for (kind of like the shutdown?).
Senator Rand Paul argues that we are doing the unemployed a disservice by extending the benefits beyond 26 weeks. Fortunately for the politicians, they get to enjoy the holidays with a paycheck while their unemployed constituents struggle. Thankfully, the unemployment rate finally dipped back down to 7.0% – which is still much too high. Unfortunately, politicians have continued to implement austerity measures rather than focusing on investment or stimulus.

Revenge of the Populists

At last, following years of failing to clamp down on Wall Street, justice was served in 2013. This justice was tantamount to several slight taps on the wrist — but, it’s something. J.P. Morgan negotiated a $13 Billion settlement for mortgage fraud with the Department of Justice. Luckily, J.P. Morgan can get tax deductions for part of the settlement while homeowners who have their mortgage debt forgiven after December 31, 2013 will be stuck with a higher tax bill. Go figure. Fabrice Tourre, a Goldman Sachs middle man in the mortgage crisis, was found guilty of misleading investors. Bank of America was also found liable for Countrywide mortgage fraud. What a year for wrist slaps!

Pope Francis renewed focus on income inequality and emphasized taking care of the least of these. Senator Elizabeth Warren has strongly advocated for strengthening the social safety net rather than saving it through cuts. President Obama has spoken up for increasing the minimum wage. In actuality, 13 states will have minimum wage increases on January 1, 2014. Humans are not great at prediction so I won’t try to forecast what will happen in 2014. However, I will say that the rising wages are a very positive sign.

Balance of Power

The US Federal Government has been shut down for 16 days with no clear end in sight. Tomorrow, the US Treasury will no longer have authority to borrow money to pay the bills if the debt ceiling is not raised. How did we get here? False equivalency moves one to say “a pox on both their houses”.   Why can’t Democrats and Republicans just make a deal? Firefighters and arsonists have no business working together.

 

Do you remember when the Democrats shutdown the government to stop the Bush tax cuts? It never happened. Elections do have consequences. Republicans control one-half of one-third of Government; yet, they act as though they run the White House and the Senate. The Tea Party suicide caucus believes in their mission to stop Obamacare so much that they were willing to shutdown the Government and risk the full faith and credit of the United States . If the debt ceiling is not raised, the US would very likely default on upcoming payments on November 1st and 15th. The result of a default would be greater than the failure of Lehman Brothers –  a spike in interest rates, a market crash, layoffs, missed social security and disability payments just for starters. We should not be at this edge. This is a manufactured crisis.

 

The Founding Fathers put in place checks and balances to prevent any one branch of the Government from becoming too powerful. Yet, the Founders could not foresee one faction in one branch of Government becoming so obstructive as to not do their job unless their will was implemented by the Senate and the President.

Republicans psuedo-leaders are simply fighting over who should be Captain of the Titanic. A democracy cannot function this way. The Tea Party wants to incite a political coup d’etat. Republicans can’t win major elections so they rather just want to blow the whole thing up and rule over scorched earth. Some people just want to watch the world burn.

Back to the Brink

Shutdown and Debt Ceiling Debate Prove U.S. Not Worthy of AAA Credit Rating

~ Standard and Poor’s

Chaos is the New Normal

Government by crisis has become the norm. The President remarked in his presser yesterday that we seem to have a crisis every few months. Republican leaders are saying that Presidents have always negotiated on the debt ceiling. Paul Ryan echoed this sentiment in his Op-ed in the Wall Street Journal. Not true. Some Republicans are arguing that NOTHING will happen if the US Congress does not raise the debt ceiling. Congressman Joe Barton claimed that we could prioritize payments and maybe even skip a few. I wonder what Wall Street and foreign investors have to say about that?

The Crux of the Matter

What exactly do Republicans want? The GOP controls one-half of one-third of the US Government yet they are operating as if they won the Senate and the White House in 2012. Don’t mind that. They claim they have a mandate. Paul Ryan mentioned a few demands like tax and entitlement reform in his Op-ed. I included a list of demands in yesterday’s post, The Little Faction That Could:

  • Entitlement reform (Ryan Budget plan for Social Security and Medicare)
  • Approve the Keystone XL Pipeline
  • Tax Reform (Lower corporate tax rates and eliminate deductions)
  • Weaken the Consumer Financial Protection Bureau
  • Delay Obamacare for one year
  • Increase oil drilling
  • Cut $120 Billion from federal health spending
  • Block federal regulations of greenhouse gas emissions
  • Restrict federal industry regulation

Speaker John Boehner claims that he just wants to have a conversation with President Obama. A conversation about what!? What is the real aim of this conversation?

The Republicans haven’t exactly been nice to President Obama. Mitch McConnell said that he wanted him to be a one-term President. Joe Wilson called him a liar during a State of the Union speech. McConnell and Boehner slapped him around a bit during the debt ceiling negotiations of yesteryear. So, what do Republicans want? The GOP wants to enact a conservative vision for America and they want to make the President look bad in the process.

Behold! A Flock of Black Swans

The key problem with governing by crisis is the Law of Unintended Consequences. There is a some risk to driving but playing a game of chicken increases the likelihood of a very bad outcome. Republicans held the debt ceiling hostage last year and it resulted in a stock market plunge and the loss of a perfect credit rating for the first time in US history. Speaker Boehner and the Republicans are flirting with disaster. The closer we get to the edge, the more likely it is that very, very bad things can happen. All bets are off once Pandora’s Box has been opened. Speaker Boehner can keep Pandora’s box closed by stepping back from the brink and bringing a clean Continuing Resolution and Debt Ceiling Increase Bill to the floor of the House. I pray that reason rules the day.

The Little Faction That Could

We have met the enemy and he is us.

~ Pogo

The US Federal Government has been Shutdown for 8 days with no end in sight. This is both a tragedy and a “success story” for a small faction within the lower chamber of the US Congress. The Grand Old Party (GOP) controls one-third of one-half of the Federal Government; yet, they shutdown the entire Government to delay, defund or weaken the Affordable Care Act. The irony is that the Affordable Care Act is partially funded through Mandatory Spending; thus, the law went into affect on October 1st despite the Shutdown.

The interesting tidbit is that the Affordable Care Act was passed by the House and the Senate, signed by the President, affirmed by the Supreme Court, and reaffirmed by the American people via the President’s re-election. Mention these pesky facts to any elected Republican and they will regurgitate the talking points that “America elected a divided Government” or “the GOP won the House”.

Settled Law?

A little bit of School House Rock is useful at this point.

Law’s can be overturned by the Supreme Court or by Congress. One of two processes can be used to repeal a law:

  • The House and Senate pass a repeal bill. The President signs it.
  • The House and Senate pass a repeal bill. The President vetoes it. The Senate overcomes the veto with 2/3 of Senators voting on repeal.

So, if the Republicans genuinely want to repeal Obamacare they could win the Senate and the White House…or just pick up enough seats in the Senate to overcome a Presidential veto.

Cruz Control

Along came a snake oil salesman by the name of Ted Cruz. He grew up with a silver spoon and received an Ivy league education but claimed to be a common man. He sold his Tea Party friends on the idea that the Affordable Care Act could be defunded. He met secretly with House members and held a faux 21 hour filibuster to rally the troops to his cause. He made his troops believe the Democrats would cave to their demands at the threat of a Government Shutdown.

Frankenstein’s Monster

Cruz didn’t start this drama, he is merely a participant trying to raise his stock in hopes of running for President (Still waiting on his long form birth certificate). This drama has roots in the Citizens United case and the aspirations of the billionaire Koch brothers. One of the Koch brother’s organizations planned this Government Shutdown (talking points included) the day after President Obama started his second term. FreedomWorks, an organization funded by the Koch Brothers published a guide to “Honor Sequester Savings and Defund Obamacare“. There was a concerted effort, funded by billionaires and carried out by Tea Party House members to shutdown the government. Moreover, the Tea Party Patriots provided another defund Obamacare toolkits.

Making Bad Ideas Worse

Political leaders are currently at a stalemate. Speaker Boehner and Republicans refuse to pass a clean bill to open up the Government and Democrats and the White House refuse to negotiate to weaken the Affordable Care Act. The Republicans caused this disaster and hoped that the Dems would cave. This isn’t happening. The last time that the President responded to hostage-taking it only encouraged further and more extreme threats. Therefore, Speaker Boehner and the Republicans want to merge the Government Shutdown and the Debt Ceiling together.

The US is one of the few countries that votes twice on spending. Congress either passes a budget or continuing resolution that authorizes spending. The US currently runs a budget deficit so about 40% of spending is borrowed. Raising the debt ceiling enables the Government to pay for spending that has already been approved. Raising the debt ceiling does not authorize new spending. Nonetheless, Republicans don’t want to raise the debt ceiling unless they get their wish list:

  • Entitlement reform (Ryan Budget plan for Social Security and Medicare)
  • Approve the Keystone XL Pipeline
  • Tax Reform (Lower corporate tax rates and eliminate deductions)
  • Weaken the Consumer Financial Protection Bureau
  • Delay Obamacare for one year
  • Increase oil drilling
  • Cut $120 Billion from federal health spending
  • Block federal regulations of greenhouse gas emissions
  • Restrict federal industry regulation

So, the Republicans are governing as though they won the 2012 election and control the House and the Senate. Except, this isn’t the case. The GOP wants to repeal the Affordable Care Act but they just might need to repeal reality first.