TAXING TIMES, October 2013 EDITION
By Rick Torkelson, CPA and principal of Torkelson & Associates, LLP in Petaluma, CA
If you’re like me, up to now, Obamacare has been a concept and not something you really had to act on . . . until now. My objective here is to dig into this new law of the land enough to give you some insight on what you should probably be thinking about right now and what the penalties might be if you do nothing and hope for the best (not often a good strategy when dealing with the IRS). With thousands of pages of law not to mention all the political commentary, don’t believe that these few words will tell you everything you need to know.
Originally, in 2014, large employers (50 or more employees) had to offer insurance to their employees – “OFFER” not necessarily pay for. That’s been postponed a year but the “individual mandate” still remains.
Beginning 1/1/14– all individuals must have minimum essential health insurance coverage. By October, every state must have a state insurance exchange. California’s is already up and running: www.coveredca.com. These exchanges are not insurers or government-run health plans. They are supervised marketplaces that provide access to insurers’ qualified health plans.
EXCEPTIONS TO INDIVIDUAL MANDATE
There are some limited exceptions for recognized religious sects, members of Indian tribes, and individuals who are incarcerated (now there’s some room for planning!) The most important exception surrounds low income. Unless you are someone else’s dependent, you are exempt if you do not have a filing requirement. This is about 10K annual income if you are single and about 20K if you are married filing jointly. Also exempt are individuals for whom coverage is too expensive. If an employee is eligible for coverage (at their own expense), but his or her share of the premium exceeds 8% of the household’s total income. As a rule of thumb, a single adult with no dependents would not be subject to penalty if total income were less than about $35,000. For a married couple with no dependents, income less than about $60,000 would probably exempt you from penalty.
The penalty for not having health insurance without meeting any of the exceptions is $95 per person, $47.50 for each family member under age 18 – with a maximum penalty of $285. The penalty tax is paid with your tax return so the 2014 penalties will be due April 15, 2015.
These penalties will jump from $95 per adult in 2014 to $325 per adult in 2015 and $695 per adult in 2016. So the message is gentle warning the first year, then they get really serious.
California’s health insurance exchange – designed around The Patient Protection and Affordable Care Act – can be found at www.coveredca.com. There is a wealth of information on this site on the law and the various insurance plans available.
The obvious purpose of The Patient Protection and Affordable Care Act (AKA Obamacare) is to have the vast majority of Americans covered by health insurance. If you can’t afford health insurance, there are remedies in the law to make the minimum coverage as affordable as possible. If you don’t have health insurance and can afford it, check out the web site and consider at least the minimum coverage.
Procrastinators beware!– The Final filing deadline for 2012 tax returns (assuming you were extended) is Tuesday October 15, 2013.