Individual mandate penalty is coming ready or notAlthough there have been efforts at the legislative level to postpone the individual mandate penalty, the legislature has not been successful. So if you do not have some type of insurance coverage this year, you will be required to pay the individual mandate penalty. Individuals, however, who have health insurance from their employer, the government or directly from an insurer in 2014 will not have to pay the individual mandate penalty.
What is the cost for the individual mandate penalty?
In 2014, the individual mandate penalty will be modest. You will only have to pay $95 or 1% of income, per adult, whichever is greater. But the penalties for those who are not low-income residents could be quite high. For instance, some higher income individuals could have to pay as much as $3,600. Couples who have two children and a high income could pay as much as $11,000.
The bad news is the penalty will grow over time. In fact, the minimum will increase to $325 in 2015 and $695 in 2016. But because the penalty will grow with inflation, the minimum could get as high as $800 by 2023.
So lets look at some examples:
If, for instance, you are a single person with no children you could end up paying only $95 but you would have to earn only $19,000 or less per year. What if you make $30,000? Unfortunately, at this level you will pay an estimated $200. If you make $40,000 the individual mandate penalty jumps to $300.
What if you have a family? The penalties become much higher for families. For instance, if you are married with three children and your annual income is between $50,000 and $100,000 a year, you will be forced to pay between $300 and $800. According to The Hill, The minimum for a married couple with three children is $285 because the penalties extend to the children.
Who can avoid the individual mandate tax?
There are several identified groups that could get a waiver. For instance, if you are an American Indian, if you have religious objections to health insurance, if you are in jail or if you can prove purchasing insurance could impose economic hardship you can avoid paying the individual mandate penalty.
What if you dont pay the individual mandate penalty? The IRS is planning to subtract the tax from your income tax refund or future income refunds, but as of now, the law does not allow them to garnish your wages or throw you in jail if you do not pay.
Congress tries to delay the individual mandate tax
The best way to avoid the individual mandate penalty is to purchase health care insurance. Another way is to avoid an income tax refund, although this is complicated and could take years of planning.
Last week we saw new efforts by both Democrats and House Republicans to delay the individual mandate penalty with twenty-seven Democrats joining with Republicans to vote on a bill to delay tax penalties for failing to buy health insurance this year under ObamaCare.
Republicans argue forcing individuals to buy insurance this year when employers received a delay to provide insurance to their employers is not fair to individuals. Some Democrats continue to blast the bill as the GOPs 50th attempt to repeal or undermine the law.