This article was last updated on November 2017
The Affordable Care Act (ACA or Obamacare) works on the premise that when people buy into the system, everyone gains access to affordable health insurance. Young, healthy enrollees offset the cost of older people with more health problems. A larger pool of applicants drives down costs. The full text of the law spans more than 2,700 pages. Within those pages, penalties for not complying with the law are referenced in section 1501, Chapter 84 (26 U.S.C. §5000A), which describes a fee for people who fail to get health insurance by the deadline each year.
The rule that requires you to get covered is called the individual mandate.
Penalty fees increase each year based on inflation. We’ll discuss specific figures below. The Supreme Court rules that the individual mandate is a tax, which means that the IRS has the authority to collect this payment when you file your return.
If you get caught speeding on the highway, you’re probably going to get a ticket. You have a choice about how fast you go when you drive, but there are consequences to that choice. The same is true of any law, including the Affordable Care Act. Whether you agree with a law or not, the fact is that there are consequences to ignoring it. When lawmakers drafted the ACA, they put measures into place that would hold people accountable for obtaining coverage. If you don’t get health insurance and you don’t qualify for an exemption, then you will be charged a penalty fee for noncompliance.
Judicial Challenges to the Individual Mandate
In the early days of the Affordable Care Act, the individual mandate was challenged not just by the court of public opinion but by the highest court in the land – the Supreme Court. In 2010 and 2011, different federal circuit courts, the 6th and the 11th, issued conflicting decisions regarding the constitutionality of requiring every American citizen to obtain health insurance. The Supreme Court took the issue up for review on November 14, 2011 in National Federation of Independent Business v. Sebelius. From 2009 to 2014, Kathleen Sebelius was the U.S. Secretary of Health and Human Services.
At question in this case was whether the individual mandate was a valid extension of the government’s power, specifically the power of Congress. The court also had to decide if invalidating the mandate invalidated the entire law. On June 28, 2012, the justices returned a 5-4 decision to uphold the individual mandate. They ruled that the mandate was to be considered a tax, and by that definition, Congress had a legal authority to collect it under the Taxing Clause.
Do I Have to Comply with the Individual Mandate?
Most people have to get health insurance under the law, whether it’s from the marketplace, your job or directly through an insurer. However, there are certain groups of people who are exempt from the individual mandate. That means they don’t have to have health insurance and don’t have to pay the penalty fee for noncompliance. If you fall into one of the categories below, then you most likely qualify for an exemption:
- Young adults under age 26 who are still on their parents’ health plans
- People for whom health insurance remains unaffordable (meaning the lowest-priced plan available to you costs more than 8.16 percent of your household income)
- People who don’t file a federal tax return because their income is too low
- Members of federally recognized religious sects that object to insurance
- Members of federally recognized health care sharing ministries
- Members of federally recognized Native American or Alaska Native tribes
- People who are incarcerated
- Illegal immigrants or unlawful residents
- People who qualify for a hardship exemption (see below)
The mandate only applies if you’re without health insurance for longer than three consecutive months. You’re not exempt from the mandate if you hold out on buying insurance, but you will only be charged the tax penalty for the months that you lacked coverage, minus that 3-month grace period.
In most cases, you can apply for an exemption before the deadline passes. The deadline coincides with the open enrollment period. For 2018 coverage, you have from November 1, 2017 through December 15, 2017 to sign up or file for an exemption. You could also wait to apply for an exemption when you file your income taxes in the spring. However, if your exemption isn’t approved when you file your taxes, then you will owe the penalty fee for the year. Applying early gives you a chance to get covered if your application isn’t approved.
If you’re approved for an exemption, then you’ll be given an exemption certificate number, which you’ll need to list on your tax return to avoid getting fined for noncompliance.
You may be exempt from the individual mandate if you experience a hardship. Once the hardship resolves, you will be required to have health insurance. Hardships include:
- Being homeless
- Being evicted within the last six months, or facing eviction or foreclosure
- Being a victim of domestic violence or abuse, or spousal abandonment
- A recent death in the family
- Natural or manmade disasters that result in significant property damage
- Filing for bankruptcy within the last six months
- Facing unpaid medical bills for the last 24 months
- Unexpected financial difficulties as a result of caring for family members
- Not being eligible for Medicaid because your state didn’t expand eligibility requirements
- Having your current coverage canceled and being unable to afford marketplace coverage
If you apply for an exemption but are denied, you’ll have to enroll in minimum essential coverage to avoid getting fined. You can:
- Shop for a compliant plan on the federal marketplace, your state’s exchange site if it has one or a private marketplace
- Connect with a licensed broker, who can help you on or off the marketplace
- Research and sign up for a plan through a private insurance company on your own
Open enrollment only applies to people who need private insurance. Employers set their own enrollment periods, which typically run during the fall. If you’re eligible for Medicaid or CHIP, you can sign up with these programs at any time. Medicare participants will follow Medicare’s schedule of enrollment, which differs based on what you want to do. For each of these government programs, there’s a separate website available. You’ll enroll directly with each entity. Having Medicaid or CHIP counts as minimum essential coverage, as does having Medicare Part A alone. If you only have Medicare Part B, then you’re not considered covered under the law. You’ll need to enroll in additional coverage (like Part A or Medicare Advantage) to comply with the individual mandate.
- If you need help navigating enrollment, licensed agents are standing by to assist you. Whether you need to sign up for private insurance or Medicare, we can help.
Does My Coverage Meet ACA Requirements?
If you sign up for a plan that does not meet the minimum requirements for essential health coverage under the Affordable Care Act, you will still be penalized the tax for noncompliance. Having a noncompliant plan means that you’re wasting your money on a deficient policy. It also means you’re getting fewer benefits than someone with an ACA-compliant plan.
If you signed up for a policy directly on the marketplace, you can rest assured that your policy complies with the minimum essential coverage requirements under Obamacare. Every insurance company that sells a plan on the marketplace has been verified by the U.S. Department of Health and Human Services (HHS) that their plans are compliant and affordable.
All health insurance policies are now required to meet this minimum standard for every participant. Whether you buy on or off the marketplace, every major-medical policy created on or after March 23, 2010 must adhere to the requirements of the ACA. This includes:
- Traditional insurance plans
- Children’s Health Insurance Program (CHIP)
- Employer-sponsored coverage
- TRICARE, which is insurance for active or retired military members and their families
Prior to Obamacare, insurance companies offered a variety of coverage terms for a variety of prices. Unfortunately, there was very little uniformity in the industry. Too often, people were paying more for very little coverage. For this and many other reasons, the Obama administration decided that the standards of care – including the coverage that insurance companies offer their participants – had to be raised, and they had to be uniform. This way, everyone knows that no matter which level of policy they pay for, they are receiving certain coverage protections.
Here are the 10 essential benefits that all new policies – sold on or off the marketplace, or through your employer – must include:
- Preventive care
- Outpatient care
- Inpatient hospitalization
- Emergency services
- Pediatric care, including dental and vision
- Maternity care before, during and after birth
- Prescription drug coverage
- Rehabilitative and habilitative services and equipment
- Mental health services
- Lab services
The Affordable Care Act imposed other requirements and conditions on Obamacare-compliant policies offered on and off the marketplace. One such condition of an ACA-compliant plan is that a company cannot deny coverage for a pre-existing condition and cannot cancel a policy just because a person gets sick. In addition, insurance companies cannot discriminate or assign premiums based on a person’s race, sex, ethnicity or financial situation, medical history or a disability.
Furthermore, insurance companies are no longer permitted to cap annual or lifetime claim payouts. This means that no claim will ever be denied under an ACA-compliant policy. Finally, people under the age of 26 who are not offered healthcare through an employer may stay on their parents’ policy until they can get their own policy or until their 26th birthday.
I Need Help Paying for a Healthcare Policy. What Can I Do?
When drafting the Affordable Care Act, lawmakers recognized that many families and individuals didn’t have insurance simply because they could not afford the coverage. As a result, the ACA includes measures to make insurance more affordable, including federal cost assistance. This financial help is called an advance premium tax credit or subsidy.
If your income falls within the necessary range, then you may be eligible for a tax credit to reduce your monthly premium bill. The marketplace will determine your eligibility. You can use a licensed insurance broker to help you navigate the marketplace, but you can only get a subsidy if you sign up for health insurance via the exchange. Subsidies are not available in the private market.
You may be eligible for a subsidy if your income falls between 100 and 400 percent of the federal poverty level (FPL). The rates in the table below apply to residents of the 48 contiguous states and Washington, D.C. in 2017. Alaska and Hawaii residents have different poverty guidelines per state.
Income Ranges for ACA Subsidy in 2018
|Family Size||Annual Household Income|
|Individual||$12,060 to $48,240|
|Family of 2||$16,240 to $64,960|
|Family of 3||$20,420 to $81,680|
|Family of 4||$24,600 to $98,400|
|Family of 5||$28,780 to $115,120|
|Family of 6||$32,960 to $131,840|
|Family of 7||$37,140 to $148,560|
|Family of 8||$41,320 to $165,280|
|Family of more than 8||Add $4,180 for each additional person for the base, and multiply by 4 for the maximum|
Individuals or families who make under 250 percent of the federal poverty level, and who choose a silver-level plan through the state or federal marketplace, are eligible for additional cost assistance. This credit is reimbursed on your federal income taxes. It’s designed to reimburse you for out-of-pocket costs associated with your medical care throughout the year, such as your annual deductible, copays and coinsurance payments.
How Much Will It Cost to Ignore the Individual Mandate?
Like all laws, the Affordable Care Act includes penalties for not complying. In this case, you’ll be charged a fee known as the individual shared responsibility payment if you choose not to get qualifying health insurance and you don’t qualify for an exemption.
In 2017, the fee was $695 per adult and $347.50 per uninsured child, per household, or 2.5 percent of your family’s taxable income, whichever is greater. Fees for 2018 have not been finalized, but they are expected to be comparable or higher to last year’s penalty. The fee is taxed against your taxable income, which is what the IRS taxes, not your gross income. And you only get charged for every month that you didn’t have coverage, minus three months.
You may think that this fee is nominal compared with other penalties, but the idea behind the penalty payment isn’t to create undue hardship. The fee is designed to be challenging enough to get your attention. The IRS does not have the authority to impose steep punishments – like property liens or imprisonment – like it does with other unpaid taxes, but you can be charged late fees on top of the penalty fee. Your penalty fee may also be deducted from any refund that you might be owed when you file your taxes.
To avoid the hassle and cost of getting hit with fines, make sure that you sign up for health insurance when you can. You can only get major medical coverage during open enrollment unless you qualify for a special enrollment period based on a qualifying life event. For coverage beginning in 2018, the open enrollment period runs from November 1, 2017 through December 15, 2017.
How Do I Pay the Tax Penalty?
The IRS is responsible for managing and collecting the tax penalty from people who don’t get health insurance. If you owe the penalty, then you will pay it along with other taxes that you might owe when you file your annual return. If you expect a refund, then the noncompliance fee will be taken out of that refund before you receive it. Those who don’t pay taxes due to low income will be exempt from the individual mandate to get coverage.
This article was last updated on Nov 19, 2015
Passing a law that required all American citizens to obtain healthcare would be futile if there was no way to enforce the requirement and punish for noncompliance. Writing punishments into laws that will help ensure that people follow the law has been done all throughout history. Although it would be ideal for people to follow the laws of their state or federal government, lawmakers are realistic in realizing that many people would choose not to take additional actions and make the effort to be in compliance with a new law if they had the option. This is particularly true for a law like the Affordable Care Act (ACA), or Obamacare, as it is also known. The ACA requires people to pay for something that was formally considered a luxury, which, oftentimes, they could not take on due to financial reasons.
The bottom line is that the Obama Administration knew that eventually, insured Americans would be accepting of the new requirement to have health coverage. But until Obamacare became more accepted by society, their representatives in Congress and mainstream media, the law would need to provide provisions for punishment to persons who choose not to comply with the requirements.
The financial punishment or tax is called the Individual Mandate.
The nearly 1,000-page Patient Protection and Affordable Care Act discusses the requirements for people to obtain and maintain minimum essential healthcare coverage. Specifically, in section 1501, Chapter 48 (26 U.S.C. §5000A), the ACA states that under the ACA, those who fail to do so by the deadline imposed will be subject to a penalty. This penalty is fixed and increases in amount and severity with every calendar year. The specific dollar amounts imposed per year will be discussed in further detail below.
Judicial challenges to the Individual Mandate
The penalty referenced in the Affordable Care Act for noncompliance, with its requirements imposed on individuals, was swiftly challenged in many federal courts across the United States in 2010 and 2011. In those cases, the 11th Circuit and the 6th Circuit issued conflicting decisions regarding the constitutionality of what was coined the “Individual Mandate.” The Supreme Court took the issue up for review on November 14, 2011, in National Federation of Independent Business versus Kathleen Sebelius, Secretary of Health and Human Services.
Specifically, the justices reviewed the question of whether the Individual Mandate provision of the Affordable Care Act was able to be severed from the rest of the Act. And, if not, it was questioned whether the entire Act needed to be invalidated and whether the Individual Mandate provision exceeded the expressed powers granted to Congress under the Constitution.
On June 28, 2012, the justices returned a decision that was consolidated with another federal case regarding whether or not the ACA can require states to expand the eligibility requirements of Medicaid or be penalized. The Supreme Court’s 5-4 decision regarding the Individual Mandate held that Congress could impose the penalty on all persons that did not comply with the individual requirements of the Affordable Care Act, under the Congressional power to tax its citizens. Accordingly, whereas the ACA called the penalty a “shared responsibility payment,” the justices specifically defined the Individual Mandate “penalty” as a tax.
Must I comply with Obamacare’s Individual Mandate?
The first question to answer to determine regarding any law in the Unites States is whether it applies to you specifically. In regards to Obamacare, there are certain groups of people that are not required to obtain and maintain minimum essential healthcare coverage at any point in time. These people do not have to worry about: paying for healthcare through the Marketplace, obtaining an Obamacare-compliant plan from a private, corporate insurance company or signing up for insurance through their employer. This is because the law simply does not apply to them, and they are considered an exempt class of people.
In most cases, a person must either fill out an application and be approved for the exemption before each year’s deadline to comply. Or, they can advise the government of their exemption on that year’s tax return. There is a risk of waiting until your tax return to indicate you are exempt. If the exemption is not approved, you will be taxed for a year of noncompliance. But if you apply before the deadline and are not approved, you still have time to get insurance through the Marketplace before the enrollment period ends.
Certain types of exemptions require supporting documentation, in addition to the application. If a person’s exemption is approved, they will receive an Exemption Certificate Number. This must be listed on their federal income tax return in order to avoid the tax penalty for noncompliance.
According to Healthcare.gov, which is the official website for Obamacare and the Marketplace, the following groups of people may be exempt from complying with the individual requirements of Obamacare:
- Native Americans receiving healthcare from a different governmental program
- A member of a recognized healthcare sharing ministry (HCSM)
- A member of a recognized religious sect, with religious objections to insurance
- An incarcerated person
- Illegal immigrants living within the United States
- Americans who have only been without health insurance for three months or less
- Americans that are under the age of 26 and are still on their parent’s health insurance policy
- Americans who are exempt from filing a federal income tax return due to low income levels
- The lowest-priced insurance coverage available to you is more than 8 percent of your household income
- You qualify for a hardship exemption (examples are provided below)
As is generally the case for any exemption, a person who wants to apply for a hardship exemption will be required to comply with the individual requirements after the hardship is resolved. Examples of a hardship that could qualify a person for temporary exemption would be:
- You are homeless
- You were evicted in the past six months from your home or are facing eviction or foreclosure
- You are a victim of domestic violence
- There was a recent death of a close family member
- You experienced a natural or human-caused disaster that resulted in substantial damage to your property
- You filed bankruptcy in the last six months
- You have medical expenses that you haven’t been able to pay in the last 24 months
- You are experiencing an unexpected financial hardship due to caring for a family member
- You cannot get Medicaid because your state did not expand the eligibility requirement
- Your individual insurance plan was canceled, and you believe the plans offered under the Marketplace are unaffordable.
A person may not qualify for an exemption and be required to obtain and maintain a minimum essential healthcare plan under Obamacare. If so, he or she can:
- Shop for a compliant plan on the federal or state or a private marketplace
- Connect to a licensed broker; they can either sign them up for a plan under the Marketplace or a plan through a private insurance company that meets the minimum standards imposed
- Simply research and sign up for a plan through a private healthcare insurance company on their own
A person who is eligible for a plan under Medicaid can sign up for that plan directly through the Marketplace. This will take them to their state’s Medicaid website; they will not need to contact a licensed broker to help with the process. A Medicaid-eligible participant must still sign up for a policy and be in compliance with Obamacare by the same deadlines imposed on others.
A person who is eligible for Medicare must also comply with those specific deadlines to enroll. A participant who opts for Medicare Part A or Part B must enroll through Medicare.gov. You can obtain more information on Medicare through the following resources: Medicare.gov, MedicareEnrollment.com or Medicare.net.
A participant who opts to sign up for Medicare Part C can do so through a private carrier directly. He or she can connect with a licensed insurance broker, who can set them up with a plan. Or, the person can do the research and sign up for their own Part C Plan with a private insurance company. A Medicare Part C Plan is one that is provided through a private insurance company that meets the minimum essential care requirements of Obamacare. This plan essentially offers the same, if not more, coverage than Parts A and B combined. Again, a participant of Medicare Part C must still comply with the deadlines imposed under Obamacare and Medicare.
Does my coverage meet the requirements to avoid the tax penalty?
If you sign up for a plan that does not meet the minimum requirements for essential health coverage imposed by the Affordable Care Act, you will still be penalized with a tax for every year of non-compliance. Additionally, a noncompliant plan means that you are wasting your money on a deficient policy. And, you are receiving fewer benefits than your neighbor.
If you signed up for a policy directly on the Marketplace, you can rest assured that your policy complies with the minimum essential coverage requirements under Obamacare. This is because every insurance company that offers its business on the Marketplace has been verified by the U.S. Department of Health and Human Services (HHS) that their plans are compliant and affordable.
All health insurance policies are now required to meet this minimum standard for every participant. As previously stated, this applies such plans as:
- Traditional insurance plans
- CHIP (Children’s Health Insurance Program), which is Medicaid for children
- Policies provided by employers
- TRICARE, which is insurance for active or retired military members and their families.
Prior to Obamacare, insurance companies offered a variety of coverage terms for a variety of prices. Unfortunately, there was very little uniformity amongst the industry. Oftentimes, people were paying more for very little coverage. For this and many other reasons, the Obama Administration decided that the standards of care and coverage that insurance companies offer their participants must be raised. The standards must be uniform, as well. This way, everyone knows that no matter which level of policy they pay for, they are receiving certain coverage protections.
The essential health benefits required by all insurance policies offered by an employer, in the Marketplace or in the private sector, are:
- Ambulatory Patient Services, which is defined as any care you would get outside of a hospital stay. This includes: tests, treatments, rehabilitation, minor surgical procedures conducted in a doctor’s office or clinic, X-rays, ultrasounds and biopsies. The service could be performed at a doctor’s office, a clinic, an urgent care center or outpatient hospital center or an emergency room, to name a few.
- Emergency services in a hospital, urgent care center, doctor’s office or other outpatient hospital center
- Inpatient hospitalization
- Maternity and newborn care
- Mental health and substance use disorder services that include behavioral health treatments
- Prescription drug coverage; however, there is no minimum essential benefit requirement regarding the copays associated with prescription drug coverage or the cost of both generic and brand name drugs. These cost-related issues may vary, based on the level of policy coverage that a person can afford.
- Rehabilitative and habilitative services and devices, which may include occupational and physical therapies and speech therapy. The definition of a rehabilitative service is one that allows a patient to regain and reacquire some function or skill that has been lost due to a sickness or injury. An example would be if a stroke patient has diminished hand coordination and needs physical therapy. A habilitative service is one that allows the patient to reacquire a function or skill that should be there, but is not, due to a sickness or injury. An example of this would be if an autistic person is unable to speak and needs speech therapy.
- Laboratory services
- Preventive and wellness services and chronic disease management
- Pediatric services related to oral and vision care
The Affordable Care Act imposed other requirements and conditions on Obamacare-compliant policies offered in both the Marketplace and the private sector. One such condition of an ACA-compliant plan is that a company cannot deny coverage for a pre-existing condition and cannot cancel a policy just because a person got sick. In addition, insurance companies cannot discriminate or assign premiums based on a persons’: race, sex, ethnicity or financial situation, medical history or a disability.
Furthermore, insurance companies are no longer permitted to cap annual or lifetime claim payouts. This means that no claim will ever be denied under an Obamacare-compliant policy. Finally, persons under the age of 26 years old, who are not offered healthcare through an employer, may stay on their parent’s policy until they are able to get their own policy or until their 26th birthday.
I need help paying for a healthcare policy. What can I do?
When drafting the Affordable Care Act, the Obama Administration recognized that many families and individuals chose not to be insured simply because they could not afford the coverage. As a result, the ACA includes measures whereby a person can get help from the federal government to pay for the total cost of the premium. This financial help is called receiving a financial subsidy..
If a person or family falls within the below ranges of annual income, they may be eligible for a federal subsidy. The federal subsidy will be applied to monthly premium. Then, the person will only be charged for the remaining balance.
Whether or not a person is eligible for a subsidy will only be determined after they fill out the application for a Marketplace plan. A person can also connect with a licensed insurance broker, who will help them through the process, as well. The results provided will clearly indicate to the person what their monthly costs, or premium amount, will be, after the subsidy amount is deducted.
The following financial guidelines can be used to determine whether a person or family is eligible for a federal subsidy. This range of income equates to a person who make between 100 and 400 percent of the federal poverty level (FPL). These financial ranges do not apply to people living in Alaska and Hawaii. People in those states should refer to Healthcare.gov for more information. The federal subsidy is currently available to everyone, even if you live in a state that has its own state exchange.
- $11,670 to $45,680 for a single person
- $15,730 to $62,920 for a family of two
- $19,790 to $79,160 for a family of three
- $23,850 to $95,400 for a family of four
- $27910 to $111,640 for a family of five
- $31,970 to $127,880 for a family of six
- $36,030 to $144,120 for a family of seven
- $40,090 to $160,360 for a family of eight
Individuals or families who make under 250 percent of the federal poverty level, and who choose a silver-level plan through the state or federal Marketplace, are eligible for a tax credit. This credit is reimbursed on the person’s federal income taxes. It is designed to reimburse the person for the insurance-related, out-of-pocket costs they have spent throughout the year on things like their annual deductible, copays and coinsurance payments.
What will it cost me if I do not purchase health insurance under the Individual Mandate?
TWithin the Patient Protection and Affordable Care Act, the tax penalty is officially known as the Individual Shared Responsibility Payment. , This penalty is imposed on Americans who do not comply with the requirements of Obamacare, but have consistent healthcare coverage that meets the minimum essential coverage requirements. The penalty is not meant to be debilitating. Instead, it is designed to be enough of a nuisance that it causes a person to take necessary action to comply with the law.
This is the intent of most penalties for noncompliance with a particular law. For instance, a police officer can give a person a ticket for a couple hundred dollars if he or she determines that you are violating a state law for driving without sufficient (or any) automobile insurance. In most instances, the cost of the ticket is not enough to cause a financial hardship. Rather, it is enough to entice the person to go out and buy automobile insurance to comply with the law. The Obamacare tax penalty is designed to have the same effect.
For the 2016 calendar year, all American citizens are required to sign up for healthcare by the end of the Open Enrollment Period (OEP), which is Jan. 31, 2016. However, for those that miss this deadline, the government may allow an extension, known as a Special Enrollment Period (SEP).
You may also qualify for an SEP if you meet the requirements for a Qualifying Life Event (QLE). Under the ACA, these are life changes, such as marriage or pregnancy. To obtain more information on QLEs, you can go to ObamacareQualifyingEvents.com.
For 2016 enrollment, people can begin to apply for healthcare coverage during the OEP, which begins on November 15, 2015. The deadline to enroll in an ACA-compliant policy will be Jan. 31, 2016.
Getting down to dollars and cents, the Affordable Care Act has assigned tax penalties for non-compliance with the individual requirements of the law; these will increase every year. Of course, if you have an insurance policy through your employer, you have met the requirements of the law and will not be taxed.
For the 2015 calendar year, the tax penalty is $325.00 per uninsured adult and $162.50 for a noncompliant child, or 2 percent of the annual household income above the tax filing threshold for that year, whichever is higher. For the 2016 calendar year, these costs will increase to $695 per uninsured adult and $347.50 for a noncompliant child, or 2.5 percent of the annual household income above the tax filing threshold for that year, whichever is higher.
To determine the annual household income, only income above the tax-filing threshold for an individual will be used. The tax filing threshold is a little more than $10,000.00 a year. This means that if a person makes under this amount, they would not have to file federal income taxes and, they would qualify for an exemption for complying with the Obamacare Act.
If a person is not in compliance with the ACA for any number of months in a year above three months, they will only be taxed for the reciprocal portion. For instance, if a person did not have Obamacare-compliant healthcare for four months of the 2015 calendar year, they will only be taxed for four months of noncompliance. This is just a portion of the total amount due. Any person without healthcare for three months or less is exempt or excused from the tax penalty.
How Do I Pay the Tax Penalty?
The Obama Administration has assigned the responsibility of managing and collecting the tax penalty on noncompliant Americans on the Internal Revenue Service (IRS). Accordingly, the tax penalty will be identified and will be taken out with your personal federal income tax filings for a given year.
For instance, if a person was not in compliance with the ACA for the entire year of 2015, the IRS will assign the appropriate tax penalty (either $325.00 per noncompliant adult and $162.50 for a noncompliant child, or 2 percent of the household income above the annual tax filing threshold. The IRS will either deduct that amount from that person’s annual return, or they will include that tax penalty in the total amount due for other taxes.
Not paying this tax will have the same consequences as not paying other taxes due to the federal government. This could include various financial penalties.