ObamaCare: What’s in Stock for the Taxpayer? (Part Five)
by Dr. Peter Ikre
This article marks the culmination of a 5-part series on the impact of the Patient Protection and Affordable Care Act (PPACA), aka ObamaCare, on taxpayers and businesses around the country. Following the conclusion of the 2nd Open Enrollment Period (OEP) three weeks ago (02/15/2015 to be precise), it is appropriate to do a recap of some of the salient points covered during the series. Although the enrollment period ended in mid-February, you can still sign up for health insurance through the market place if you fit into any of these categories, namely: a) changes in household size, b) changes in circumstance, c) changes in status, d) being a member of a federally recognized tribe, such as an Indian or Alaskan native tribe. Under ‘changes in household’ category, individuals experiencing any of the following events can access the marketplace to obtain health insurance: a) just got married, b) had a baby, c) got divorced, d) lost your health insurance, e) adoption of a child, and f) death in the family. With respect to ‘changes in circumstances’, the following may apply: a) change in income and b) moving to a new place not covered by your health plan. ‘Change in status’ category refers to events such as a) gaining residency or citizenship and b) being released from incarceration or prison (Health Insurance Marketplace, 2015b). If any of the afore-mentioned conditions apply to you, please know that you can go online or call the marketplace (1-800-318-2596) to assist you with getting health insurance. If you need certified persons to assist you in obtaining health insurance, please contact Investigroup, NP located at 1282 Liberty Avenue, Hillside, NJ. 07205 (Telephone: 9086884778; Fax: 9086887178). In this concluding section, some comments will be devoted to retirement planning as a bonus to my faithful readership. The tax season is currently in progress. In fact, it is about to enter its final phase. Except you file for an extension, most of us have just over a month to file our taxes. If you have done so already, you must have observed a new phenomenon with this year’s tax filings. The Affordable Care Act (ACT) or Obamacare requires everyone in the country to have health insurance (Individual Mandate) or face penalties starting from 2014 except for those meeting the exemption requirements. Exemptions can come in different forms, namely: a) income-related, b) health-coverage related, c) group membership, d) hardship, and e) miscellaneous exemptions. To be eligible for income-related exemptions, one’s income has to be below a certain level that makes it unnecessary to file a tax return. You can be excused from the process if acquisition of health insurance through the marketplace or job-based plan becomes too burdensome for you. In other words, if the cheapest coverage available to you through the marketplace or job-based plan exceeds 8% of your household income, you will be exempted from the insurance requirement. Other factors leading to one being exempted from the Individual Mandate (IM) include: a) incarceration, b) not lawfully residing in the country, c) homelessness, d) member of a federally recognized tribe, such as Native Indian/Alaska, e) various hardship conditions, such as eviction in the past 6 months/facing foreclosure, bankruptcy, fire/flood/natural disasters, experiencing domestic violence/death in the family, and inability to pay outstanding medical bills in the past 2 years
to mention just a few (Health Care Marketplace, 2015a). Some of you must have noticed that the penalty for not having health insurance in 2014 can be as low as $95 or as high as 1% of your adjusted gross income (AGI), whichever is greater. The fine comes in form of a deduction from your refund based on the computed amount. Let’s consider the following scenario in which you have an AGI of $20, 000, refund of $3000 and failure to obtain health insurance coverage for yourself or any other household member in 2014. In this case, the penalty for the taxpayer will be the greater of $95 or 1% of $20, 000 (0.01 * 20,000 = $200). Since $200 is greater than $95, $200.00 will be deducted from the refund of $3000 leaving the taxpayer with $2800.00. The penalty rate is 1% in the first year (2014) and programmed to increase to 2% and over in subsequent years. Finally, some comments on retirement planning vis-à-vis the tax refunds. It is no longer news that social security payments are grossly inadequate to meet your needs in retirement. With people living much longer than ever before (life expectancy at birth averaging 80 years for both men and women), it is likely that you’d outlive your savings if don’t plan adequately for the future event. You don’t have to end up that way if you heed to sound advice as epitomized in this piece. In light of this development, governments and employers alike encourage employees to take advantage of savings programs available at the workplace. A good practice is to channel some or all of the refunds toward retirement/investment opportunities, such as the establishment of college funds for the kids, opening of individual retirement accounts (IRAs), and setting up accounts for income replacement and leaving behind a legacy for your family. These are very powerful concepts, and it will be a privilege to expand on any of these ideas if given the opportunity. For more information, please feel free to contact me at 9083421160. Remember that I am here to serve you as always. Enjoy the rest of the tax season!
References
Health Insurance Marketplace (2015a). Exemptions from the fee for not having health coverage. Retrieved from https://www.healthcare.gov/fees-exemptions/exemptions-from-the-fee/#hardshipexemptions
Health Insurance Marketplace (2015b). Getting 2015 coverage with a Special Enrollment Period. Retrieved from
https://www.healthcare.gov/coverage-outside-open-enrollment/special-enrollment-period/
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on Mar 21 2015. Filed under Community News.
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