Individual Insurance: Reporting Coverage and Paying Penalties (Part 2)
Posted on: January 29, 2015Categories: HR & ComplianceWho is exempt from the individual mandate?
You may be exempt from the individual mandate penalty if you:
- Cannot afford coverage
- Have income below the federal income tax filing threshold
- Are not a citizen, are not considered a national or are not lawfully present in the United States
- Experience a gap in coverage for less than a continuous three-month period
- Qualify as a religious conscientious objector
- Are a member of a health care sharing ministry
- Are a member of certain American Indian tribes
- Are given a hardship exemption by the Department of Health and Human Services
- Are incarcerated
How much will the individual mandate penalty cost me?
The penalty for not obtaining acceptable health care coverage is being phased in over a three-year period. The amount of the penalty is either your “flat dollar amount” or your “percentage of income amount”—whichever is greater.
For 2014, the annual penalty is either:
- One percent of your household income that is above the tax return filing threshold for your filing status; or
- Your family’s flat dollar amount, which is $95 per adult and $47.50 per child, limited to a family maximum of $285.
Your payment amount is capped at the cost of the national average premium for a bronze level health plan, available through the Marketplace in 2014. For 2014, the annual national average premium for a bronze level health plan available through the Marketplace is $2,448 per individual ($204 per month), but $12,240 for a family with five or more members ($1,020 per month).
Calculating your payment requires you to know your household income and your tax return filing threshold.
Household income is the adjusted gross income from your tax return plus any excludible foreign earned income and tax-exempt interest you receive during the taxable year. Household income also includes the adjusted gross incomes of all of your dependents who are required to file tax returns.
Tax return filing threshold is the minimum amount of gross income an individual of your age and filing status (for example, single, married filing jointly, head of household) must make to be required to file a tax return.
2014 Federal Tax Filing Requirement Thresholds
| Filing Status | Age | Must File a Return if Gross Income Exceeds |
| Single | Under 65 | $10,150 |
| 65 or older | $11,700 | |
| Head of Household | Under 65 | $13,050 |
| 65 or older | $14,600 | |
| Married Filing Jointly | Under 65 (both spouses) | $20,300 |
| 65 or older (one spouse) | $21,500 | |
| 65 or older (both spouses) | $22,700 | |
| Married Filing Separately | Any age | $3,950 |
| Qualifying Widow(er) with Dependent Children | Under 65 | $16,350 |
| 65 or older | $17,550 |
The IRS will generally assess and collect individual mandate penalties in the same manner as taxes, with certain limitations. As a result, any penalty under the individual mandate will likely be subtracted from the tax refund that the individual is owed, if any.
Source: Internal Revenue Service
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