Health Care Penalties In 2015: How To Avoid Obamacare Fee And Report Insurance Status To IRS

Millions of Americans who forwent buying health insurance in 2014 could face penalties in the coming year, the first such fees since open enrollment under the Affordable Care Act, or Obamacare, began in October 2013. The fine is part of President Barack Obama’s landmark law that requires all taxpayers to divulge their health insurance status to the Internal Revenue Service when filing their federal income tax returns. People who qualify for an exemption can avoid paying the penalty, but there is a little bit of extra paperwork involved.

Under Obamacare, which went into effect in March 2010, most Americans were required to have health insurance by 2014. The deadline for avoiding penalties was March 31. Penalties for not having insurance in 2014 were $95 per person or 1 percent of taxable household income, whichever was more – but are slated to rise in 2015 and 2016. That means a person whose 2014 taxable income was $23,000 and who qualified for a lower premium plan but did not purchase it would pay 1 percent of income – $230 – not $95. Next year, the uninsured will have to pay the higher of two amounts: $325 per person or 2 percent of income.

The U.S. Supreme Court in 2012 upheld the Affordable Care Act’s so-called individual mandate, which requires purchasing health insurance to avoid a fine, after ruling that the penalty was a tax. Twenty-six states had sued over the law, claiming that the individual mandate was unconstitutional because it compelled Americans to purchase something they might not want.

An estimated 4 million uninsured Americans will pay a penalty for not having health insurance last year, according to the Associated Press. Millions more will qualify for one or several exemptions from the penalties, many of them based on income or inability to pay for health care. Most Americans will fall into one of three categories when it comes to reporting health care status to the IRS for 2014.

1. If health care was obtained through Healthcare.gov or an insurance “exchange.” People whose health insurance was purchased through the online marketplace will get a new form in the mail by early February 2015. Form 1095-A, titled the “Health Insurance Marketplace Statement,” must be submitted when filing taxes for 2014. A form will be received for each policy purchased through the marketplace.

2. If health care coverage was obtained through a job, Medicare, Medicaid, or through a plan bought outside the Marketplace. People who were covered for at least nine months in 2014 will report their health care status by checking a box on their federal income tax forms. They will not receive in the mail or need to submit a Form 1095-A. Most “grandfathered” plans – plans created before March 23, 2010 – as well as people covered by the Children’s Health Insurance Program, and those under age 26 who receive health care through a parent’s plan are considered in this category.

3. If no health insurance was obtained, or for people who were uninsured for 3 months or more in 2014. Americans who could have purchased a plan but chose not to will have to pay a fee when they file their 2014 tax forms. In general, the higher a person’s income and the more months spent uninsured, the steeper the fee.

An estimated 26 million uninsured people will qualify for one or more of 30 exemptions. People who want to apply for an exemption can visit Healthcare.gov and fill out one of several forms. Other exemptions can be claimed when filing federal income tax forms.