By Chase Squires

Posted in Budgeting - 1 year ago

Line 61: The IRS and Your Clients’ Health Care

Line 61: The IRS and Your Clients’ Health Care

Don’t forget, Uncle Sam wants to make extra sure your clients have health care. In fact, there’s a fine if they don’t.

Line 61, introduced in time to appear on last year’s federal income tax 1040 form, asks if filers have health care coverage as part of the Affordable Care Act (ACA, also known as Obamacare). Under the ACA, virtually everyone must have coverage, and the fines for non-compliance are starting to add up.

The Individual Shared Responsibility Provision requires all Americans to demonstrate they have coverage unless they qualify for an exemption such as insufficient income or other hardship.

Granted, for investors, the idea of going without health care may sound ludicrous. But there are always special cases: the worker who was between jobs for four months during the year; the client’s adult child who simply “forgot” to replace mom and dad’s coverage when he moved out; or the couple who retired at 63 and never had to deal with insurance outside of a workplace before. It happens.

Can’t check off that box on line 61 for 2015? get ready to face the Shared Responsibility Payment. Adults can face penalties. Here’s what the IRS says on its Taxpayer Advocate Site:

In general, the Shared Responsibility Payment is one of the following:
  • A flat dollar amount. For 2015, it is $325 per person (half that for individuals under 18) and capped at the amount for 3 adults.
  • A percentage of your income (your excess income amount). For 2015, it is 2% of your income over the filing threshold for your filing status.
  • The national average bronze plan premium. For 2015, it is $207 per month for each family member (up to four) and $1,035 per month for a family with five or more.

If you are subject to the Shared Responsibility Payment, the payment is the larger of the flat dollar amount or your excess income amount.

The penalties increase dramatically for those who don’t carry insurance in 2016. As with any issue relating to taxes, it’s always a good idea to consult with a qualified tax professional.

To demonstrate coverage, taxpayers don’t have to do more than check off the box on line 61 on the 1040 tax form. For workers, employers provide the proof on the W2 form they send in with their taxes. Those who obtain health insurance through a private company or an insurance marketplace will get a form to store with their tax documents, a 1095-A or 1095-B.

The IRS offers a fairly simple chart on all of this, with links to allowable exemptions, what to do if there was only coverage for part of the year, and other situations on a page titled, “Health Care Law & Your Tax Return.”

For clients who think they might have slipped up and owe a penalty the IRS offers an online estimator where they can enter their income and family size (the computer figures out the income thresholds) and get an idea of what they might owe.

Neither Transamerica nor its agents or representatives may provide tax or legal advice. Anyone to whom this material is promoted, marketed, or recommended should consult with and rely on their own independent tax and legal advisors regarding their particular situation and the concepts presented herein.