IRS Announces Caps on ACA-Related Penalties for Going Uninsured
The Internal Revenue Service (“IRS”) recently released information that the upper limit on the federal tax penalties that some Americans will owe for not purchasing health insurance this year is $2,448 per individual or $12,240 for a family of five.
This cap is based on the monthly national average premium for a bronze-level health plan.
The figures are important because the Obama Administration had previously only provided theoretical caps.
The Affordable Care Act (“ACA”) requires people to have health insurance in 2014 or pay a penalty when they file their 2014 tax returns. The penalty, known as the “individual shared responsibility payment,” is the greater of a flat amount or a percentage of adjusted gross income per household.
Penalties for 2014 start at $95 per adult and $47.50 per child and rise to 1% of household income. According to the Associated Press, the cap that has been set will only benefit people who earn more than $250,000 per year, and people who earn less would still pay fines of as much as 1% of their annual income. In 2016, the penalties increase to $695 per adult and half of that for a child, or 2.5% of household income.
Conservative lawmakers and groups critical of the ACA had encouraged people to not purchase health insurance by arguing that it would be cheaper to pay the $95 penalty, often not mentioning that the penalty was the greater of $95 or 1% of household income, or the risks associated with being uninsured.
If you have questions or concerns about the implications of this information, please contact your Trust Fund counsel.
By Stephanie L. Marn | October 21, 2014