Obamacare and The Individual Mandate Tax Dilemma

There are dozens of ways to escape Obamacare’s individual mandate tax — but good luck figuring that out come tax season.

Tens of millions of Americans can avoid the fee if they qualify for exemptions like hardship or living in poverty, but the convoluted process has some experts worried individuals will be tripped up by lost paperwork, the need to verify information with multiple sources and long delays that extend beyond tax season.

“It’s not going to be pretty,” said George Brandes, vice president of health care programs at Jackson Hewitt, a tax prep firm. “Just because you theoretically qualify for hardship, or another exemption, doesn’t mean you’re going to get it.”

The worries may foreshadow a messy tax season next year as the one in 10 Americans who remain uninsured calculate their tax bill for the first time under Obamacare’s individual mandate.
Those without health insurance will have to cough up $95 per person or 1 percent of their income, whichever is greater. That penalty eventually jumps to $695 or 2.5 percent.

The White House expanded the list of exemptions allowing the uninsured to bypass the penalty for legitimate reasons, including religious restrictions, falling on rocky times or a death in the family. Another big out created after the controversy over canceled health plans was the so-called affordability exemption that allows people to opt out if premiums are still not affordable.

The Congressional Budget Office expects 23 million of the 30 million Americans who remain uninsured in 2016 to qualify for exemptions. It’s part of the reason the CBO in June downgraded from 6 million to 4 million the number of people it estimates will pay the penalty.
The uninsured have two ways to opt out: The easiest way is fill out a new tax form for those exemptions that don’t require Obamacare marketplace approval. Some will be simple, including the exemption for being uninsured for under three months or those living below a certain income — about $10,150 for singles and $20,300 for married couples.

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Jeffrey R. Ungvary President

Jeffrey R. Ungvary