IRS Proposes New Regulations Penalizing Non-Compliance of Obamacare

Tax Professionals' Resource
February 6, 2014 — 2,017 views  
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The much talked about Obamacare mandate finally came into effect on January 1. Now the IRS has proposed regulations that govern penalties in case individuals do not comply with it. The tax-collection agency has been given the task of enforcing these regulations.


The Patient Protection and Affordable Care Act (PPACA) the 2010 legislation, more popularly known as “Obamacare”, made it mandatory for individuals to get “minimum essential health insurance”, in case they didn't have it already. On failing to acquire minimum essential health insurance, they will be mildly penalized initially, but it can get stricter in the next few years. Minimum health insurance coverage can be defined as health insurance under:

  • Government- sponsored coverage plans
  • Employer-sponsored coverage plans
  • Individual marketplace plans
  • Grandfathered insurance coverage plans
  • Other health benefits recognized by Secretary of Health and Human Services

Non-Compliance Penalties

For the year 2014, an individual should bear a penalty of $95 (individuals under 18 bear a penalty of $47.50), which almost accounts to about 1 percent of the household income. A family can bear a maximum penalty of $285. The fee increases in 2015, to $325 per individual, $162.5 for under 18's and $975 for a family, which accounts to 2 percent of the household income. In 2016, the fee rises to $695 per individual, with 42,085 for families, that is 2.5 percent of the household income. Post 2016, the fees climb further up to inflation rates. If an individual is uninsured only for a certain portion of a year, he or she will be liable to a penalty that is one-twelfth the annual penalty, per month.

Although individuals don't have to pay the fee if they are uninsured for under three months, individuals can avoid being penalized by enrolling before March 31, 2013. Which means, if you enroll for a plan on March 31, and your coverage comes into play from May or June, you won't be penalized for the preceding months in 2014.

The IRS has addressed many loopholes in the Obamacare law. For example, a few government-sponsored plans like Medicare-based plans and two other military health plans allow limited coverage. Also, if individuals aren't able to afford the minimum coverage, they can be exempted from it. Again, if the costs exceed the household income of the individual by 8 percent, they can be exempted from it. The IRS has asked the public to participate in commenting on the regulations up till April 28.



Tax Professionals' Resource