Our insurance agency has received several inquiries about the upcoming Obamacare penalty amounts for those who do not purchase health insurance. It is important to understand how these penalties will be enforced and ways to avoid them.
The penalties will vary for singles and for families and can, for some, end up being a portion of their income. Those who are caught off guard by the Obamacare penalties can end up owing much more that what they might have anticipated.
The penalty for those who do not purchase health insurance will vary. In other words, contrary to what you may have heard or read, it is not necessarily a flat rate. And the amount will increase year over year as well.
The piece of this legislation that is not getting enough attention is the percentage of income clause. For reasons unknown to us, no one has really sounded the alarm on this issue.
If you are a self-employed with significant income, you should strongly consider purchasing health insurance if you don’t already own coverage. Multiply your income by .025 and you can see how much this new law might cost you.
In a word, yes. The penalties as they are drawn up now will increase each year through 2016. By 2016, the Obamacare penalty for not purchasing health insurance will be $695 for an individual or 2.5% of income – whichever is greater. That could be a sizable tax penalty for high earning individuals and families.
As contentious as this legislation is, it would not be surprising to see changes over the next few years, but if the law is not amended or postponed, then then individual mandate (and penalties) will continue to be enforced by the IRS.
(It should be noted that there will be many who purchase insurance on the exchanges who will qualify for a premium subsidy.)
The IRS will enforce the Obamacare penalties through tax return information. If you file a return each year, it is our understanding that there will be a place to provide proof of insurance.
If you do not have proof of insurance, then your penalty will be applied.
In other words, the IRS could garnish your end of the year tax refund should you be owed a rebate. If you’re not due a refund, then it is somewhat unclear how the IRS would enforce the penalty.
Needless to say, the tax enforcers will find a way. That’s their job – to enforce tax laws. Those who run afoul of the law will likely receive correspondence of some kind.
And it may be likely that those who owe more than $695 (due to the 2% income rule) would be a higher priority for the IRS than those will smaller penalties. If you don’t file a tax return, the IRS may not find you right away – or at all. That story is yet to be told.
There are several ways to avoid the upcoming Obamacare penalties – some less expensive than others. Our independent insurance agency can help you through your options.
We are offering health insurance on and off the exchanges and can help you to remain compliant with the law. Contact us today for more information.