More Questions and Answers on the Shared Responsibility Provision
5: Does the provision affect me if I'm on my spouse's plan from work?
If you and your children are covered by your spouse's employer-sponsored plan, you're likely good to go. Most employer-sponsored plans provided minimum essential coverage. In addition, you and your children don't have to be covered under the same policy [source: IRS].
4: How much is the penalty?
You will be taxed if you do not adhere to the individual mandate. The idea behind the tax is to make sure most everyone has health care coverage. Without the penalty, people would not opt to buy insurance even though the law requires insurance companies to provide coverage for everyone regardless of pre-existing conditions. If that were the case, the cost of health insurance would skyrocket as the sick flooded the market while the healthy stayed away.
If you didn't have coverage for all of 2014, the penalty is 1 percent of your household income, or $95 for adults and $47.50 per child under the age of 18. You pay whichever amount is greater. The maximum a family would pay, however, is $285.
In 2015, the penalty will be 2 percent of your annual household income, or $325 per adult and $162.50 per child, up to a maximum of $975 per family. As before, you'll pay whichever amount is greater. In 2016, each person will pay $695 — or 2.5 percent of the family's combined income. When inflation goes, up, so do the penalties [source: Healthcare.gov].
3: If I'm unemployed, do I have to pay the penalty?
If you cannot afford insurance based on your income, you might be able to get an exemption. However, if you don't qualify, you will have to pay the penalty when you file your income taxes. If you don't, the IRS will deduct it from your tax refund [source: Healthcare.gov].
2: If I change health coverage during the year and there's a short gap in coverage, do I still pay the penalty?
Many of us have been here more than once. We leave a job and our employer-sponsored health coverage, and start another job weeks or even months later. If that or any other similar circumstance happens to you, are you still obligated to pay the penalty for such a short gap in coverage? If the gap is less than three months, you can ask for an exemption and not pay the tax. If you're not granted an exemption, 1/12 of the yearly penalty applies to each month you don't have insurance [source: Healthcare.gov].
1: What happens if I do not have minimum coverage and can't afford the penalty?
Death and taxes. It is often said they are the only two constants in a person's life. Make no mistake about it, the government wants its money, and the IRS will work with you if you can't pay the penalty. However, the law stops the IRS from placing a lien on your property, but it will deduct the penalty if you have a tax refund [source: IRS].
Author's Note: 10 Questions and Answers on the Shared Responsibility Provision
Whatever you might think of the ACA, the program works for me. (Please don't send any angry emails.) Up until last year, I was paying excessively for health care coverage. It was so expensive and my deductible was so high that I never went to the doctor. I couldn't afford it. I would have foregone coverage completely had I been in my 20s and didn't own a house. These days, however, my doctor and I are almost best buds.
- Healthcare.gov. "Fees and Exemptions." (Nov. 22, 2014) https://www.healthcare.gov/fees-exemptions/fee-for-not-being-covered/
- Internal Revenue Service (IRS). "The Individual Shared Responsibility Provision." (Nov. 19, 2014) http://www.irs.gov/uac/Individual-Shared-Responsibility-Provision
- Internal Revenue Service (IRS). "Topic 851: Resident and Nonresident Aliens." (Nov. 19, 2014) http://www.irs.gov/taxtopics/tc851.html
- Internal Revenue Service (IRS). "Questions and Answers on the Individual Shared Responsibility Provision." (Nov. 19, 2014) http://www.irs.gov/uac/Questions-and-Answers-on-the-Individual-Shared-Responsibility-Provision#Who is Affected
- TurboTax. "What is the Individual Shared Responsibility Provision?" (Nov. 19, 2014). https://turbotax.intuit.com/tax-tools/tax-tips/Health-Care/What-is-the-Individual-Shared-Responsibility-Provision-/INF26072.html
- U.S. Department of Health and Human Services (HHS). "Guidance on Hardship Exemption Criteria and Special Enrollment Periods." June 26, 2013. (Nov. 21, 2014) http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/exemptions-guidance-6-26-2013.pdf
- USAF: "NAF Insurance Benefits." (Nov. 21, 2014) https://www.usafservices.com/NAFInsuranceBenefits.aspx
HowStuffWorks examines the fate of the personal exemption in light of the tax reform laws of 2017 and it affects 2018 income tax refunds.