IRS Warns Americans of Coming “Shared Responsibility Payment” Tax



February 26, 2014


Since November the gbac Association Practice Group has opened two, private association health insurance and employee benefit marketplaces and is constructing six more slated to open by June, 2014. Interest in these association-based marketplaces is growing as more associations want to position themselves, and their members, to deal with the many challenges posed by creating and offering employee benefit plans, as well as for compliance with the Patient Protection and Affordable Care Act.

The latest reminder of what every taxpayer in America faces with ACA compliance came yesterday in three releases from the Internal Revenue Service.

On February 25, 2014 the Internal Revenue Service released a series of Patient Protection and Affordable Care Act [ACA] tax advisories, warning Americans that they must obtain qualified health insurance covered – as defined under the ACA – or face a “shared responsibility payment” when filing their tax returns in 2015, for the 2014 tax year. The term “shared responsibility payment” refers to the ACA individual mandate tax. The advisories inform all taxpayers – all taxpayers – that the IRS will be looking at whether each filer had obtained coverage under a qualified health plan for each month.

In “Four Tax Facts about the Health Care Law for Individuals” the IRS points out:

“Your 2014 tax return will ask if you had insurance coverage or qualified for an exemption.  If not, you may owe a shared responsibility payment when you file in 2015.”

In “The Individual Shared Responsibility Payment- An Overview” the IRS warns Americans they must prove they were covered each and every month of the year:

“For any month in 2014 that you or any of your dependents don’t maintain coverage and don’t qualify for an exemption, you will need to make an individual shared responsibility payment with your 2014 tax return filed in 2015.”

In “IRS Reminds Individuals of Health Care Choices for 2014” the IRS outlines the calculations Americans can look forward to if they are liable for the tax:

“If you (or any of your dependents) do not maintain coverage and do not qualify for an exemption, you will need to make an individual shared responsibility payment with your return. In general, the payment amount is either a percentage of your household income or a flat dollar amount, whichever is greater. You will owe 1/12th of the annual payment for each month you (or your dependents) do not have coverage and are not exempt. The annual payment amount for 2014 is the greater of:

1 percent of your household income that is above the tax return filing threshold for your filing status, such as Married Filing Jointly or single, or your family’s flat dollar amount, which is $95 per adult and $47.50 per child, limited to a maximum of $285.”

IRS testimony before House Committee on Ways and Means stated, “taxpayers will file their tax returns reporting their health insurance coverage, and/or making a payment.”  Once fully phased in, the Obamacare individual mandate tax will rise steeply, to a maximum of 2.5 percent of Adjusted Gross Income or $2,085 – whichever is higher.

The more than 3,600 member companies and their 52,000 employees who will have access to private, association-based health insurance and employee benefit marketplaces by June will not only have the broadest choices for the benefits they need – they will also have access to the tax compliance guidance that gives them the peace of mind that their association has provided them a safe haven from the challenges of the Affordable Care Act.

We can build a private, association health insurance and employee benefits marketplace for your association as well.


About gguilford

A successful executive well positioned to leverage extensive skill and experience in the business, government and political environments within which I have worked to bring energy, vision and skill to managing human capital, strategic planning, crisis management, corporate management, financial management, government and public affairs challenges. Positioning for the future in managing and directing change and as well as seeing and seizing opportunities others miss.
This entry was posted in Association Health Insurance and Employee Benefit Marketplaces, GBAC APG News, Health Insurance Reform. Bookmark the permalink.

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