Does anyone know if the IRS is going to enforce penalties for people who enrolled in May of 2014 and subsequently are going to have less than 9 months of coverage? I have a client threatening me because she claims I didn't tell her about this penalty or she would have enrolled by April. My recollection is very different of course but its her word against mine, and she is telling me I have to pay her penalty if she gets one. I live in a small town and don't want her big mouth hurting my reputation here.
Penalty Enforced for Less Than 9 Months Coverage in 2014?
- Thread starter Nikita
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Yes, when they go to do their taxes the Accountant/book keeper/CPA/Uncle bob will have to fill out the new forms relative to having health coverage and the penalty will be calculated then.
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While unfortunately, I wouldn't worry too much about her.
If she is doing this to you, she has probably done it to half the people in town. Nothing is every her fault and someone else is always to blame. Odds are, most people already have her number and will ignore what she says.
If she is doing this to you, she has probably done it to half the people in town. Nothing is every her fault and someone else is always to blame. Odds are, most people already have her number and will ignore what she says.
- Thread starter
- #4
ok, maybe this is a stupid question, but why did the government extend the open enrollment date last year to May 1st if those who enrolled for May 1st were going to be given a penalty for not having 9 months of insurance? This seems like bait and switch to me, and shouldn't those people have been given a warning when they enrolled in May that there would be a penalty?
First, I don't think there will be a penalty, as I believe HHS came out with an "exemption from penalty" reason on their exemption form for those that did May 1st.
Second, just tell that whacko that it's illegal to rebate any money to a consumer, and you could lose your license if you did so. Tell her the penalty is a federal law, and you're not responsible for her adherence to the law. She could have signed up anywhere. But, look at #1 above, and that may just dissolve the situation.
Be really careful with that 9 month idea. Yes, you can have a gap of less than 3 months without coverage, but that is the FIRST gap of less than 3 months in a 12-month period, and there are other technicallities.
The law says LESS THAN 3 months, not 3 months. So, consider it to be 2 months.
It's the FIRST gap. Example - one month without insurance, then several months with insurance, then 1 more month without. You only get credit for the 1st gap.
In a 12 month period - It doesn't reset January 1st. So, if you go without coverage for December through February, that's 3 consecutive months even though it spanned both 2014 and 2015 calendar years. In that case you went over 2 months, and you lose. There's a quirky provision in IRS regs that gives you grace for the 2 months in the first calendar year in case of a span like that, though. It says:
It's ONLY less than 3 months without insurance - It's not like you can go 12 months without insurance and only have to pay a penalty for 10 months of it. If you go over 2 months without coverage you lose the exemption (meaning you even lose the 2 months part). If my memory serves me correctly, this was extended for people signing up February 15th for a March 1st effective date, though.
There were other exceptions and transitional relief, some of which applied to people signing up for a May 1st effective date.
Also, the fee is prorated per month. So, even if the woman in the Original Poster's example doesn't get an exception, she only owes 4/12ths of the annual penalty. And the annual penalty is capped at 1% of income for 2014. So, if she makes $100,000, she owes 4/12ths of $1,000.
The law says LESS THAN 3 months, not 3 months. So, consider it to be 2 months.
It's the FIRST gap. Example - one month without insurance, then several months with insurance, then 1 more month without. You only get credit for the 1st gap.
In a 12 month period - It doesn't reset January 1st. So, if you go without coverage for December through February, that's 3 consecutive months even though it spanned both 2014 and 2015 calendar years. In that case you went over 2 months, and you lose. There's a quirky provision in IRS regs that gives you grace for the 2 months in the first calendar year in case of a span like that, though. It says:
" Payment Waived for First Part of Coverage Gap Spanning Multiple Years. The statute provides an exemption for gaps in coverage of less than three months. It generally specifies that such gaps be measured without regard to the calendar years in which the gap occurs. For example, a gap lasting from November through February lasts four months and therefore generally would not qualify for the exemption. However, recognizing that many individuals file their tax returns as early as January, before the length of an ongoing gap may be known, the Treasury regulations provide that if the part of a gap in the first tax year is less than three months and the individual had no prior short coverage gap within the first tax year, then no shared responsibility payment is due for the part of the gap that occurs during the first calendar year, regardless of the eventual length of the gap. For example, for a gap lasting from November through February, no payment would be due for November and December.
It's ONLY less than 3 months without insurance - It's not like you can go 12 months without insurance and only have to pay a penalty for 10 months of it. If you go over 2 months without coverage you lose the exemption (meaning you even lose the 2 months part). If my memory serves me correctly, this was extended for people signing up February 15th for a March 1st effective date, though.
There were other exceptions and transitional relief, some of which applied to people signing up for a May 1st effective date.
Also, the fee is prorated per month. So, even if the woman in the Original Poster's example doesn't get an exception, she only owes 4/12ths of the annual penalty. And the annual penalty is capped at 1% of income for 2014. So, if she makes $100,000, she owes 4/12ths of $1,000.
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And to make it even more complicated, I believe the penalty is calculated with only income above the tax filing threshold. This is where I refer them to their tax preparer.
CPA's are going to have a fun spring.
CPA's are going to have a fun spring.
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