Employee Benefits, health care, Health Care Costs, Health Care Reform, health plans, Patient Protection and Affordable Care Act, Tax
by Cynthia Marcotte Stamer

Calculating & Reporting Your ACA Individual Shared Responsibility Payment

The Health Care Law and Taxes: Reporting Coverage, Exemptions and Payments

Beginning January 1, 2014,  the individual coverage mandate rules of the Patient Protection & Affordable Care Act (ACA) generally required most American citizens to maintain health coverage meeting the “minimum essential coverage” mandates of ACA or pay an “individual shared responsibility payment.”  With the deadline for filing 2014 individual tax returns rapidly approaching, Americans now generally will be required to show their fulfillment of  or exemption from this mandate or pay the “individual shared responsibility” payment that ACA imposes as a penalty for failing to meet its individual coverage mandates when filing their 2014 individual tax returns.

Internal Revenue Service (IRS) rules now require individual Americans to report minimum essential coverage meeting ACA’s requirements, report or claim a coverage exemption, or make an individual shared responsibility payment when filing their 2014 federal income tax return. If an individual is not required to and does not want to file a tax return, however, IRS rules stay he does need to file a return solely to report his minimum essential coverage or to claim an exemption.

If a taxpayer and his dependents all had minimum essential coverage  for each month of the tax year, the taxpayer should show this on his 2014 tax return by simply checking a box on Form 1040, 1040A or 1040EZ.

Individuals who obtained a coverage exemption from the Marketplace or who qualify for an exemption must claim the exemption by filing Form 8964 with their tax return.

For any month a taxpayer or his dependents did not have coverage or a coverage exemption, IRS rules will require the individual to make a shared the responsibility payment. The payment will be reported on Form 1040, line 61 in the Other Taxes section and on the corresponding lines on Form 1040A and 1040EZ.

The Internal Revenue Code specifies that the required individual shared responsibility payment generally equals the greater of:

  • 1 percent of the taxpayer’s household income that is above the tax return filing threshold for your filing status, or
  • The taxpayer’s family’s flat dollar amount, which for 2014 is $95 per adult and $47.50 per child, limited to a family maximum of $285,
  • But capped at the cost of the national average premium for a bronze level health plan available through the Marketplace in 2014.

Many taxpayers who elected not to buy the required minimum essential coverage necessary to avoid the individual shared responsibility payment reportedly are experiencing painful surprise about the amount of their required shared responsibility payment when completing their 2014 individual tax returns.

It appears that many Americans were unaware of or did not fully appreciate that their required individual shared responsibility payment could be up to 1 percent of their family income.  Rather, they may have assumed that their family’s required individual shared responsibility payment would be only $95 per adult and $47.40 per child up to a family maximum of $285.

Depending on the income of the individual taxpayer, however, the actual individual shared responsibility is likely to be much higher.

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 per individual), but $12,240 for a family with five or more members ($1,020 per month for a family with five or more members). See Rev. Proc. 2014-46.

Many taxpayers who elected not to buy the required minimum essential coverage necessary to avoid the individual shared responsibility payment reportedly are experiencing painful surprise about the amount of their required shared responsibility payment when completing their 2014 individual tax returns.  It appears that many Americans were unaware of or did not fully appreciate that their required individual shared responsibility payment could be up to 1 percent of their family income.  Rather, they may have assumed that their family’s required individual shared responsibility payment would be only $95 per adult and $47.40 per child up to a family maximum of $285.  Depending on the income of the individual taxpayer, however, the actual individual shared responsibility is likely to be much higher. 

Taxpayers interested in more information about the ACA individual shared responsibility payment, its exemptions and reporting, should check out the information on Claiming and Reporting an Exemption and Individual Shared Responsibility Provision – Reporting and Calculating the Payment pages on IRS.gov for more information about figuring and reporting the payment.

About Project COPE: The Coalition On Patient Empowerment &  Coalition on Responsible Health Policy

As American leaders continue to struggle to deal with these and other mounting problems impacting the U.S. health care system, the input of individual Americans and businesses and community leaders is more critical than ever.  Get involved in helping to shape improvements and solutions to the U.S. health care system and the Americans it cares for by sharing your ideas and input through the Coalition For Responsible Health Care Policy  and exchanging information and ideas for helping American families deal with their family member’s illnesses, disabilities and other healthcare challenges through Project COPE: Coalition for Patient Empowerment here.

Sharing and promoting the use of practical practices, tools, information and ideas that patients and their families, health care providers, employers, health plans, communities and policymakers can share and offer to help patients, their families and others in their care communities to understand and work together to better help the patients, their family and their professional and private care community plan for and manage these  needs is the purpose of

The Coalition and its Project COPE arise and run on the belief that health care reform and policy must be patient focused, patient centric and patient empowering.  The best opportunity to improve access to quality, affordable health care for all Americans is for every American, and every employer, insurer, and community organization to seize the opportunity to be good Samaritans.  The government, health care providers, insurers and community organizations can help by providing education and resources to make understanding and dealing with the realities of illness, disability or aging easier for a patient and their family, the affected employers and others. At the end of the day, however, caring for people requires the human touch.  Americans can best improve health care by not waiting for someone else to step up:  Step up and help bridge the gap when you or your organization can. Speak up to help communicate and facilitate when you can.  Building health care neighborhoods filled with good neighbors throughout the community is the key.

The outcome of this latest health care reform push is only a small part of a continuing process.  Whether or not the Affordable Care Act makes financing care better or worse, the same challenges exist.  The real meaning of the enacted reforms will be determined largely by the shaping and implementation of regulations and enforcement actions which generally are conducted outside the public eye.  Americans individually and collectively clearly should monitor and continue to provide input through this critical time to help shape constructive rather than obstructive policy. Regardless of how the policy ultimately evolves, however, Americans, American businesses, and American communities still will need to roll up their sleeves and work to deal with the realities of dealing with ill, aging and disabled people and their families.  While the reimbursement and coverage map will change and new government mandates will confine providers, payers and patients, the practical needs and challenges of patients and families will be the same and confusion about the new configuration will create new challenges as patients, providers and payers work through the changes.

We also encourage you and others to help develop real meaningful improvements by joining Project COPE: Coalition for Patient Empowerment here by sharing ideas, tools and other solutions and other resources. The Coalition For Responsible Health Care Policy provides a resource that concerned Americans can use to share, monitor and discuss the Health Care Reform law and other health care, insurance and related laws, regulations, policies and practices and options for promoting access to quality, affordable healthcare through the design, administration and enforcement of these regulations.

You also may be interested in one or more of the following other recent articles published on the Coalition for Responsible Health Care Reform electronic publication available here, our electronic Solutions Law Press Health Care Update publication available here, or our HR & Benefits Update electronic publication available here.

You also can get details about how to arrange for your employees or other communities to participate in training on “Building Your Family’s Health Care Toolkit,”  using the “PlayForLife” resources to organize low-cost wellness programs in your workplace, school, church or other communities, and other process improvement, compliance and other training and other resources for health care providers, employers, health plans, community leaders and others here.

For Advice, Training & Other Resources

Should your business need legal advice about the taxability of or other requirements on tips, gratuities or other compensation,  assistance assessing or resolving potential past or existing compliance exposures, or monitoring and responding to these or other workforce, benefits and compensation, performance and risk management, compliance, enforcement or management concerns, the author of this update, attorney Cynthia Marcotte Stamer may be able to help.

Board Certified in Labor & Employment Law, Past Chair of the ABA RPTE Employee Benefit & Other Compensation Arrangements Group, Co-Chair and Past Chair of the ABA RPTE Welfare Plan Committee, Vice Chair of the ABA TIPS Employee Benefit Plans Committee, an ABA Joint Committee On Employee Benefits Council representative, Past Chair of the ABA Health Law Section Managed Care & Insurance Section, a Fellow in the American College of Employee Benefit Counsel, ABA, and State Bar of Texas, Ms. Stamer has more than 25 years’ experience advising health plan and employee benefit, insurance, financial services, employer and health industry clients about these and other matters. Ms. Stamer has extensive experience advising and assisting health plans and insurers about ACA, and a wide range of other plan design, administration, data security and privacy and other compliance risk management policies.  Ms. Stamer also regularly represents clients and works with Congress and state legislatures, EBSA, IRS, EEOC, OCR and other HHS agencies, state insurance and other regulators, and others.   She also publishes and speaks extensively on health and other employee benefit plan and insurance, staffing and human resources, compensation and benefits, technology, public policy, privacy, regulatory and public policy and other operations and risk management concerns. Her publications and insights appear in the Health Care Compliance Association, Atlantic Information Service, Bureau of National Affairs, World At Work, The Wall Street Journal, Business Insurance, the Dallas Morning News, Modern Health Care, Managed Healthcare, Health Leaders, and a many other national and local publications.

You can review other recent human resources, employee benefits and internal controls publications and resources and additional information about the employment, employee benefits and other experience of the Cynthia Marcotte Stamer here. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile at www.cynthiastamer.com or by registering to receive these and other updates here.  Recent examples of these updates include:

NOTE:  This article is provided for educational purposes.  It is does not provide legal advice, establish any attorney-client relationship or provide or serve as a substitute for legal advice to any individual or organization.  Readers must engage properly qualified legal counsel to secure legal advice about the rules discussed in light of specific circumstances.ANY STATEMENTS CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN BY THE WRITER TO BE USED, AND NOTHING CONTAINED HEREIN CAN BE USED BY YOU OR ANY OTHER PERSON, FOR THE PURPOSE OF (1) AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW, or (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED TRANSACTION OR MATTER ADDRESSED HEREIN.  ©2015 Cynthia Marcotte Stamer, P.C. Non-exclusive license to republish granted to Solutions Law Press.  All other rights reserved.