Drums, PA -- (SBWIRE) -- 02/10/2015 -- With the implementation of the Affordable Care Act, Americans who chose to opt out of health coverage will end up paying a rather high penalty. For a five person family with a high income, the penalty can max out at over $12,000 in 2014. This penalty is expected to rise significantly in 2015 and continue upwards by 2016.
The Affordable Care Act was passed in 2010, and this is the first year the changes to the health care industry are in effect. Most Americans are required to have approved health insurance in 2014. If they don't, a penalty will be enacted under the Individual Shared Responsibility Provision, which will be payable with income tax dues.
Many people have approved health care through either their employer or the marketplace exchange. It's expected that those who will face the penalty will include wealthy individuals who chose to self-insure, or those who opt for a health care policy that doesn't meet the required standards of the Affordable Care Act.
In addition to the wealthy, young adults (late 20's to early 30's), known as "young invincibles" to the health care world, are expected to use the money they would spend on health care premiums for other purposes, such as student loans or other debt. The tax credit afforded to this group to reduce premiums is little to none, and therefore they can end up spending a significant amount of money on monthly insurance premiums.
This year, the penalty for lack of health insurance is either a set amount of $95 per adult, $47.50 for children under 18, with a family max of $285, or 1% of your household income. The penalty is assessed at whichever option is greater, and is expected to increase substantially over the next few years.
The flat penalty in 2015 will rise to $325 per adult, and continue up to $695 in 2016, plus half that per child, up to a maximum of $975 and $2,085 in 2015 and 2016, respectively. The income percentage penalty steepens in the following years, to 2% in 2015, and 2.5% in 2016.
When assessing the penalty, the definition of household income is different than many other standard calculations. The adjusted gross income (AGI), which is found at the bottom of the first page on a form-1040. The AGI includes 401 K contributions, but isn't itemized for deductions such as mortgage interest. Any income earned by children is also added to the household income threshold.
There are some groups who are exempt from paying the penalty, regardless of their health care coverage. These include those of certain religious affiliations, members of Indian tribes, prisoners, those covered by Medicare, and anyone who will be uncovered for less than three months.
"Though the penalty will be in effect this tax year, the IRS will have a difficult time determining who to penalize." explained Paul Stanley of eTax.com. "Though interest will be applied to unpaid penalties, the IRS can't use their standard collection procedures, such as instituting a lien on a home."
eTax.com was founded with the goal of helping people prepare and file their tax return quickly, easily and affordably. Since then, eTax.com has grown to become one of the most popular online tax preparation services.
For more information about eTax.com, visit http://www.etax.com