Individual Shared Responsibility Payments

The latest example of the insane complexity of the US tax system will be infuriating taxpayers this April.  Its called “Shared Responsibility Payments” and if you don’t have health insurance you might have to pay.  It is the latest provision of Obamacare to go into effect and represents a penalty to those who went without coverage for some part of the year.

How Much Will You Have To Pay?  If you don’t have coverage, you will pay the greater of[1]:

(Household income – filing threshold) * 1%

OR

A flat dollar amount

[In case you are interested: household income is AGI + excludible foreign income + tax exempt interest for you and any dependent who is required to file.  Filing threshold and the flat dollar amount are stated in the law.]

There is a cap on the result of this formula, but it still could add thousands of dollars to your tax bill.

How Do I Get Out of This?  The most obvious way is to obtain and keep your health insurance. However, there are exemptions for those with low income, certain religious beliefs or hardship situations.[2]

Bottom line, this is sure to be very complicated.

[1] http://www.irs.gov/uac/ACA-Individual-Shared-Responsibility-Provision-Calculating-the-Payment

[2] http://www.irs.gov/uac/ACA-Individual-Shared-Responsibility-Provision-Exemptions

For more information, contact our office.

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