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 Flex Zone: Making the Most of Your FSA

What is a Flexible Spending Account?

A pre-tax flexible spending account (FSA) is an employer-provided benefit set aside for health care expenses and dependent care costs. Typically, the amount is deducted from each paycheck, and either accessible through a separate account or through reimbursements. Most employees spend their FSAs on co-payments, uninsured services, and some over-the-counter medical-related purchases. According to FSAFEDS, federal employees can save up to 33% a year with an FSA option.

Use it or Lose It

All great things must come to an end, and it’s no different with FSAs. By December 31st, if you have not spent your annual deduction, the amount will not carry over to the following year. Thus, many employees rush to spend what is left over around this time of the year. So what happens when you realize you have a sizeable amount of unspent FSA money? You spend all of it. Preferably in the medical isle at your favorite supermarket without any guilt. Who knows, you may even find a great holiday gift for your loved ones!

 

Last Minute Tips

Think about these last minute tips for managing your end of year FSA spending:

Visit your doctor: It will cost you, but with money available in your FSA, you can expense the doctor’s co-payment, as well as a refill for your prescriptions. If necessary, you could also schedule a visit to the dentist, a vision exam, or orthodontist appointment by the end of the year. Don’t forget to refill your prescriptions.

Buy in bulk: What better way to load up your medicine cabinet with over-the-counter medications, pain relievers, a first aid kit, dietary supplements, vitamins, and even a fancy blood pressure monitor? Stock up now on medicine and treatment you might need in the future.

Know what’s eligible: What could ruin a pre-taxed shopping spree, you ask? Unknowingly spending your FSA end of year balance on ineligible and thus non-refundable items. FSAFEDS has a comprehensive list of all the different eligible expenses for federal employees.

Planning for Next Year’s FSA

Given that FSA allocations are predicted a year ahead during open enrollment, the end of year balance is a reflection of how accurate you were in your pre-tax set aside and spending. If you barely used your FSA, it may be beneficial to reduce the amount you set aside for next year. Similarly, you can increase your annual limit to accommodate anticipated costs, based on end of year FSA balance.

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.

I Accidently Obamacare (Repost)

This is a repost from June 11, 2012.. The Supreme Court decision on the Affordable Care Act can come as soon as today, June, 25, 2012.

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The US Supreme Court will soon announce their ruling in the Affordable Care Act. They could rule the individual mandate unconstitutional and strike down all or parts of the law. What if the Supreme Court accidently Obamacare???

What are some of the possible outcomes if the law is struck down? Conservatives will be faced with the challenge of trying to keep popular provisions of Obamacare such as keeping kids on their parents insurance until age 26 or creating a market to cover individuals with pre-existing conditions.  Also, other conservative healthcare reform methods including competing across state lines and tort reform may also be implemented. The only irony is that the individual mandate began as a conservative idea.

Another option would be to implement a public option, e.g., Medicare for all. This somehow assumes that Democrats could get a bill passed in either the House or Senate. The chances of single payer happening in a divided Government is close to nil. The most likely outcome in my opinion is that absolutely nothing happens but politicking and saber-rattling. Congress has been very efficient at shying away from solving major problems (or sometimes creating them) and a paucity of bi-partisanship.

I Accidently Obamacare

The US Supreme Court will soon announce their ruling in the Affordable Care Act. They could rule the individual mandate unconstitutional and strike down all or parts of the law. What if the Supreme Court accidently Obamacare???

What are some of the possible outcomes if the law is struck down? Conservatives will be faced with the challenge of trying to keep popular provisions of Obamacare such as keeping kids on their parents insurance until age 26 or creating a market to cover individuals with pre-existing conditions.  Also, other conservative healthcare reform methods including competing across state lines and tort reform may also be implemented. The only irony is that the individual mandate began as a conservative idea.

Another option would be to implement a public option, e.g., Medicare for all. This somehow assumes that Democrats could get a bill passed in either the House or Senate. The chances of single payer happening in a divided Government is close to nil. The most likely outcome in my opinion is that absolutely nothing happens but politicking and saber-rattling. Congress has been very efficient at shying away from solving major problems (or sometimes creating them) and a paucity of bi-partisanship.