ACA-Individual Mandate
5:27 pm
Wed June 18, 2014

No Health Insurance? You May Owe More Money On Next Year's Taxes

All year long, Alabama Public Radio is collaborating with A-L-dot-com on the Affordable Care Act. The federal deadline to sign-up for health insurance is now well in the rear view mirror and you find yourself without health care. You don’t receive insurance from your employer. You don’t qualify for Medicaid, and you didn’t sign up in the federal marketplace during the open-enrollment. The Affordable Care Act’s individual mandate says that Americans have to obtain health insurance or pay a penalty. The Internal Revenue Service will be responsible for collecting individual mandate penalties.

“For 2014, the penalty would either be the greater of one percent of your gross income or adjusted gross income over a certain threshold,” says Jonathan Kassouf, a Certified Public Accountant in Birmingham. “Or 95 dollars per family member, so that’s 95 dollars per taxpayer, per spouse and for a child I think its 47 dollars and 50 cents.”

$95 for the husband, $95 for the wife and $47.50 for a child, and the lowest amount a family of three could be paying is $237.50. That’s a decent amount of money to have to pay to not have insurance.

“It may be cheaper than buying insurance on the exchange if you don’t get a subsidy,” says Leonard Nelson, professor emeritus at Samford University with a background in public health. “There are people who were self-employed, had individual insurance policies or family policies and their income is high enough that they don’t get a premium subsidy, and their premiums increased.”

He says some families he knows saw their premiums double over last year’s amount. When your penalty for the year equals one month of insurance it may just be cheaper to pay the IRS at least for this year.

“It’s not too terribly significant in year, in 2014," says Kassouf. “But in 2015 the flat fee goes up considerably and then in 2016 the same thing occurs it goes up considerably again from 2015.”

That means our same family of three from earlier would pay no less than $812 in 2015 and $1737 in 2016. And that’s only if they earn less than the percentage of the gross annual income set by the government that particular year. This year it’s one percent. So unless our family makes less than $33,900 according to Healthcare-dot.gov then they’ll be paying more than the flat fee. So, many people may be paying more but how is the IRS going to get it? If you are receiving a return the penalty will be subtracted from that amount, but if you owe money the penalty will be tacked on. This is where it gets a little tricky.

“They don’t have any power to get that portion of what you owe them,” says Montre Carradine, a law professor at the University of Alabama. “They can’t do it through the normal procedures that they would utilize for typical penalties, so they can’t garnish your wages, they can’t issue tax liens on your property. So they don’t have any way to get it other than to take money from you that they owe you.”

That may seem like a lot of leeway in a law meant to get everyone insured by the end of this year. But Leonard Nelson isn’t surprised.

“The Obama Administration is not eager to enforce these mandates because that would be unpopular,” says Nelson. “If you start fining employers or if you start fining individuals there is going to be significant political blowback.”

That’s even if they can identify you as someone who does not have health insurance.

“Their way of finding you is through you self-reporting on your tax return so you have to have made enough income to file your tax return,” says Carradine. “You have to file a tax return in order for them to identify for you and then again they check it against what the health insurance companies provide for them.”

Jonathan Kassouf says not being eligible to file a tax return is just one of the many exemptions that exist to avoid penalties from the IRS.

“Depending upon whether or not you’re a member of a certain religious sect, whether or not you’re a member of a health care sharing ministry, whether or not you’re a U.S. citizen, whether or not you were imprisoned at least one day during a month, and Indian tribe…”

While people may make a fuss over the individual mandate and its penalties-- it may not be the big burden everyone expects. At least for 2014’s taxes.