President Obama signed the Affordable Care Act into law in March 2010 following a contentious partisan battle. Comprehending the full meaning of this Act continues to take time, as federal agencies and the courts provide clarification. This issue is primarily focused on a series of articles created by Richard Hammar to provide an overview of the provisions that have the greatest relevance to churches and church staff, and affect tax reporting for 2014, 2015, and beyond.
One of the Affordable Care Act’s most important and divisive provisions is a requirement that, beginning in 2014, “applicable individuals” are required to maintain “minimum essential” health care coverage or pay a penalty.
Failure to maintain minimum essential health care coverage will result in a penalty (“shared responsibility payment”) of the greater of $95 or 1 percent of income in 2014, $325 or 2 percent of income in 2015, and $695 or 2.5 percent of income in 2016, up to a cap of the national average “bronze plan” premium. Families will pay half the amount for children, up to a cap of $2,250 for the entire family. After 2016, dollar amounts will increase by the annual cost of living adjustment.
The penalty applies to any period an individual doesn’t maintain “minimum essential coverage.” This is determined monthly, assessed through the tax code, and accounted for as an additional amount of federal tax owed. However, use by the IRS of liens and seizures of property otherwise authorized by the tax code for the collection of taxes does not apply to the collection of this penalty.
Key point. Make a shared responsibility payment if, for any month in 2014, you, your spouse (if filing jointly), or your dependents did not have coverage and don’t qualify for a coverage exemption. See the instructions for line 61 (Form 1040) and Form 8965 for more information.