Individual Shared Responsibility Mandate
Beginning January 2014, individuals who do not maintain the proper minimum essential coverage each month, as mandated by the health care reform legislation, or qualify for an exemption will be subject to a tax to be paid on the individual's Federal income tax return. The penalty is the greater of
$95 or 1% of gross income for 2014. The minimum penalty increases to $325 in 2015 and $695 in 2016.
IRS Publication 5156
- Facts About the Individual Shared Responsibility Provision
IRS Publication 5152
- Report Changes to the Marketplace as they Happen
governing the requirement to maintain minimum essential health coverage were issued on August, 2013 and are effective as of December 31, 2013.
Proposed regulations [REG-148500-12]
were issued on January 30, 2013 and the IRS also provided an FAQ
on the topic as well. In June 2013, the IRS issued Notice 2013-42
, which provides relief from the individual shared responsibility penalty for individuals who are eligible for coverage for plans that are not on a calendar year.
Health Insurance Premium-Assistance Tax Credit
Beginning in tax years after December 31, 2013, refundable tax credits will be available to eligible taxpayers to help cover the cost of health insurance premiums for individuals and families who purchase health insurance through an insurance exchange.
How it works: An eligible individual who enrolls in a plan through an exchange will report their income to the exchange. Based on income level, the individual may be eligible to receive a premium assistance tax credit. Treasury will pay the premium assistance credit directly to the insurance plan in which the individual is enrolled. The individual will then pay to the plan the total insurance premium less the amount of the premium tax credit. An individual or family can choose to have all or a portion of the credit paid upfront to the insurance company to minimize their monthly premium payments.