I’ll start this off with a topic that came up in discussion recently: the Affordable Care Act (ACA). Also known as obamacare. I’m not an expert on the entirety of the law, just how it affects the 1040 and other relevant documents.
The layman’s reading of the law basically boils down to: everyone needs some form of health coverage unless certain exemptions apply, if one doesn’t have health coverage and doesn’t qualify for an exemption then there is a fine. The fine was the greater of 695 USD or a certain percentage of your income obviously adjusted if you had coverage for part of the year. The fine started smaller and was phased in over the years in which it was in effect. I say “was” because the fine has now been rendered effectively 0 as a result of the Tax Cuts and Jobs Act. It’s still in the code, but the values have been changed to render it 0 so if they wanted to, they could very easily bring it back.
So what were the exemptions to the fine?
- if it was deemed unaffordable (the threshold for this was extremely low so while most people couldn’t actually afford it the gov determined they could).
- If you’re a resident alien (working here on a visa or similar)
- Not being alive for a portion of the year
- Short gap in coverage (2 months or less in a year with no coverage)
and a couple others. Most of them are pretty rare occurrences with the sole exception of the short gap, at least in my office.
If you didn’t qualify for any exemption how do you avoid the fine?
You would need to have some form of qualified health coverage. “Qualified” meaning that it had to provide what the gov. determined to be “sufficient” coverage. Most people got this through their or their spouse’s workplace or if they’re old/disabled then through medicare/medicaid. If not there, then you could get your own personal plan but that route is usually quite expensive. If your employer didn’t provide you with health insurance and you couldn’t afford a personal plan, then you’d have to go with what is called a “marketplace” plan.
So, how a marketplace plan (aka obamacare) works is you calculate your affordability and make payments each month with the taxpayer supplementing your payment to reach a certain level of coverage. At the end of the year when you bring your 1095-A to someone like me, we go through and put all that information in. Based on that, you may get a credit if you overpaid, a fee if you underpaid, or possibly a zero-sum. This portion of the ACA is still very much in affect for tax purposes as I know right now (seminar doesn’t happen until the end of the year, but I haven’t seen anything to state otherwise as of yet).