Get ready for the IRS Obamacare penalties!
Since Obamacare has been fully implemented, there have been a number of incentives, breaks and penalty waivers that have allowed individuals to either obtain insurance, get cheaper rates, or forego both. At the start of the implementation, it was stipulated that beginning in 2015, individuals would face penalties if they did not obtain health insurance. As the year draws to a close, and the time for filing taxes draws near, taxpayers must be aware of the penalties they are facing if they did not get health insurance.
Letters are starting to be issued to those individuals who will be faced with those fines. The IRS recently issued a letter to Benjamin Miller, informing him he was responsible for paying back $2,344 as a result of non-payment of premiums. The problem: the family plan for his insurance increased by $1,000 a month which was not in his budget. This letter has now gone viral, exposing the expenses associated with not having insurance. The letter was tweeted to the masses by pollster Frank Luntz, which has caused a barrage of comments and retweets. What is interesting to note - the media only covered the lower cost of the penalty, not the 1%, or soon to be 2 or 2 1/2% that will go into effect. As one of the first to share his penalty letter with the general public, many individuals who will receive a letter will be surprised at the cost of the bill they are now required to pay. Although the bill is high, the cost of having no insurance with a penalty is still much less than the higher rates many now face under Obamacare.
According to the healthcare.gov website, this “individual mandate,” “shared responsibility payment,” “penalty,” or “fine” will be deducted from your Federal Income Taxes, and encompass the following:
Individuals will pay the higher of these two amounts:
- Either 2% of your yearly household income above the tax filing threshold.
- $325 per person for the year, or $162.50 per child under 18.
For individuals who still choose not to obtain insurance through Obamacare, they will pay the higher of health insurance and tax implications in the coming years.these two amounts:
- 2.5% of the yearly household income. The maximum penalty is the national average premium for a Bronze plan.
- $695 per person ($347.50 per child under 18)
For those individuals who did not think this new rule would be enforced, think again. Penalties started being assessed in 2014, but were not as high or extensive as the new rules that have been implemented. In 2014, about 7.5 million taxpayers paid the penalty on their taxes, even though most of them did not have to. Approximately $1.5 billion was collected by the IRS in fines. There were about 300,000 people who qualified for exemptions, which caused quite a bit of confusion. The IRS had to contact those individuals.
With this much confusion occurring in the 2014 tax year, and the new penalties being assessed in 2015, taxpayers need to pay attention to their mail to ensure they are not unknowingly penalized when they don’t need to be. Being proactive and educating yourself about the stipulations and penalties coming down the pipeline is key in preparing for the coming year, but the consensus remains constant for many ... they would much rather pay these fines than incur the rising costs of insurance under the Obamacare health plans.