If you’ve had to deal with the Internal Revenue Service in the past, you know how overwhelming it can be, especially when you owe money. But, now that U.S. taxpayers are subject to a penalty on their federal tax returns for failure to obtain health insurance as mandated by the Affordable Care Act, the IRS is dealing with an interesting dilemma. Well, sort of.
So far, it appears that about 7.5 million taxpayers have paid a penalty for not having health insurance last year, which is substantially more than officials had initially projected. While the IRS reported the average penalty as being approximately $200 per person, the total revenue collected in Obamacare fines was an impressive $1.5 billion.
However, IRS officials were quick to point out that, in spite of the high number of fines, “the vast majority” of the people who paid – an estimated 85 percent still received a net tax refund.
That may be good news for some, but for about 300,000 people who diligently paid the penalty; it’s quite possible they may have qualified for one of the many exemptions absolving them from having to have health coverage based on income or certain hardships, including a “qualifying life event”.
Some examples of a qualifying life event would be:
• Getting married • Having a baby • Adopting a child or placing a child for adoption or foster care • Losing other health coverage • Getting divorced • Moving to a new permanent residence • Gaining citizenship or lawful presence in the U.S. • Leaving incarceration
Because so many people unexpectedly paid an Obamacare fine, even though they may not have had to, the IRS finds itself in an awkward position. According to Mark Mazur, assistant Treasury secretary for tax policy, the agency intends to reach out to those who paid unnecessarily to inform them of possible exemptions that could have them benefit from amending their tax returns.
Under the ACA mandate, the penalty for failing to obtain some sort of health coverage last year was the greater of $95 or 1 percent of an adult’s adjusted gross household income. But, be aware, that fine more than triples this year to the higher of $325 per adult or 2 percent of adjusted gross household income. And, it doesn’t stop there as it continues to increase in future years for continued failure to have health insurance.
Obama administration officials underestimated the percentage of taxpayers who would be subject to the Obamacare penalty at between 2 and 4 percent – or between 2.7 million and 5.4 million people. However, at last count, about 6 percent of taxpayers have opted to pay the fine. And, although the ACA made it easier for them to obtain health insurance by offering federal subsidies to help pay for their plans, many have opted to pay the penalty instead.
Not surprisingly, challenges continue to plague the Obama administration in getting uninsured people to willingly enroll in affordable health coverage. The higher-than-expected number of individuals choosing to pay the penalty is evidence there is still much work to do to convince them they’re better off with health insurance than without it.
With all the available plans to choose from, you’re sure to find one that best fits your needs and budget. Don’t forget – Open Enrollment 2016 begins November 1, 2015 and continues to January 31, 2016. Take care of your health by getting a free health insurance quote today!