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ObamaCare deadline looms; a practical guide to avoiding the tax

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While pundits and politicos continue to debate the policy and specifics of the Affordable Care Act (ACA), aka “ObamaCare”, the 20% of Americans who were uninsured are facing the possibility of a tax penalty if they do not take action to purchase health coverage by March 15th (March 31 for small businesses employers and employees).

This article is not meant to comment on policy, but to give a brief and practical synopsis of what you must do to avoid a tax penalty.

First of all, the 80% of Americans who are insured through a job or family member’s job will not be penalized, and in fact, will see little change in how their coverage works. The ACA requires that employer plans cover certain services; e.g., coverage of dependents to age 26. But those changes are fairly minor in nature and most of them have already been incorporated into existing health plans.

If someone who can afford health insurance doesn't have coverage in 2014, they may have to pay a fine in addition to their own medical bills.

The fine is also known as the "penalty," "individual responsibility payment," "individual mandate” or “shared responsibility payment”. The penalty in 2014 is calculated one of 2 ways. You’ll pay whichever of these amounts is higher:

• 1 percent of your household income that is above the tax return filing threshold for your filing status. For example, for single filers, the income threshold is $10,150.

• Your family’s flat dollar amount, which is $95 per adult and $47.50 per child, limited to a maximum of $285.

The way the penalty is calculated, a single adult with household income below $19,650 would pay the $95 flat rate. A single adult with household income above $19,650 would pay an amount based on the 1 percent rate. (If income is below $10,150, no penalty is owed.)

The penalty increases every year. In 2015 it’s 2% of income or $325 per person. In 2016 and later years it’s 2.5% of income or $695 per person. After that it's adjusted for inflation.

To support enrollment efforts, Enroll America, www.enrollamerica.org, a nonprofit whose mission is to maximize the number of uninsured who enroll in health insurance, has developed a wide range of tools. The most recent , Get Covered Guide: Understanding the New Health Insurance was co-authored by Lucy Berrington, who received her MS in Health Communication at Tufts. Her guide provides basic information, definitions and simple explanations of policies in plain language. http://www.enrollamerica.org/resources/toolkits/outreach/get-covered-guide.

Who collects the fine if one is owed? The IRS. The IRS collects taxes and this is no exception. With your 2014 tax return, (in 2015) you’ll be asked if you had qualified medical insurance in 2014.

If you still uninsured, but are ready to be covered, you need to act by March 15th for coverage on April 1, 2014 to avoid the tax. For small businesses and their employees, the deadline is extended to March 31st for coverage May 1, 2014. The Enroll America website above is a good starting point. New Yorkers can also find additional information at https://nystateofhealth.ny.gov.

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