(NewsUSA) – Unless you’ve been way out of touch, you probably know that a key part of the Affordable Care Act (ACA) requires that taxpayers have qualifying health care coverage. Those without will need to qualify for an exemption, or pay a penalty. This “Individual Shared Responsibility” provision applies to both individuals and families. So, while preparing your tax return this year, here are some things you ought to know.
If in 2014, you, your spouse and everyone else on your tax return (dependents) had “minimum essential coverage,” which includes most employer-sponsored plans, as well as programs such as Medicare, Medicaid, CHIP and insurance purchased through the Health Insurance Marketplace, you’re in fine shape. Just check the appropriate box that says you are insured for the full year. If there were months that someone on your return had no coverage, that person needs to qualify for an exemption or pay a penalty.
To qualify for an exemption, one of the following situations must exist:
The individual does not have access to affordable coverage because the minimum annual premium available is more than eight percent of the household income.
The gap in coverage existed for less than three months.
The individual qualifies for other exemptions that include a hardship or being a member of a group that is exempt from health coverage (for example, incarcerated inmates or members of a federally recognized Indian tribe).
Without coverage or an exemption, you’ll have to pay a penalty for each month you were not insured. This penalty is calculated and reported on your tax return. In general, the payment amount is the greater of 1 percent of your household income over the filing threshold for your filing status, or $95 per person ($47.50 per person under 18 years old). This caps at a family maximum of $285 for 2014.
You’ll owe half the annual payment for each month you or another person on your return doesn’t have either qualifying health care or an exemption. Sound complicated? Taxes are. That’s why so many taxpayers are thrilled to turn their taxes over to a paid preparer.
If that’s your plan this year, be careful to make sure your preparer is licensed and required to complete continuing education to keep up with the changing tax code. Enrolled agents (“EAs”) are licensed by the U.S. Department of Treasury, must pass an exam administered by IRS and complete IRS-approved continuing education. You can trust your taxes to an EA — locate one in your area on the searchable “Find an EA” database at www.naea.org.