The Affordable Care Act (ACA) finally went into effect in 2014 and if you’re not one of the lucky ones to have health insurance provided by an employers, you more than likely signed up through the ACA Marketplace.
Or you threw caution to the wind and decided you’d rather avoid buying health insurance altogether and pay the penalties instead.
Unfortunately, whether you signed up for health care or not, if you chose your plan through the Marketplace, you might receive an unwelcome surprise on your taxes this year.
Why might I pay more in taxes this year?
A lot of you probably aren’t too familiar with the advance premium tax credit that the U.S. government doled out to many Americans this year to help offset the cost of monthly coverage. In fact, you might not have known about it all even though you went through the proper application steps.
However, if you received any advanced financial assistance from the U.S. government, you may be required to pay back some of the money.
Why would I owe the government money?
If you bought health insurance through the Marketplace then you were required to estimate your yearly household income. If you ended up underestimating how much money you made in 2014 then you could owe the difference between what you were actually paid in assistance against your actual eligibility.
What’s the likelihood I’ll have to pay back some of my advance premium tax credit?
H&R Block, a leading tax advisory, estimates that as many as 3.5 million Americans will owe money.
However, they aren’t the only ones who will end up paying the government. Tax penalties are now being implemented against those of you that decided to balk at the new mandatory health care law and don’t qualify for automatic exemptions (or just failed to sign up for some).
In your mind you probably are willing to take your chances you won’t need health care and think paying the penalty is cheaper than monthly payments for insurance you deem not cost-effective.
Do you know what the penalties are for failing to purchase health insurance?
Penalties range from $47 for a child, $96 for an adult and up to $285 per household, or 1 percent of household income. If you’re uninsured, you’ll be made to pay the larger sum of the two penalties.
The penalties are expected to increase every year. This means potentially paying quite a bit of money, especially if you unexpectedly find yourself needing to pay for costly medical treatment after all.
So what can I do to avoid paying?
If you owe money for the tax credit you are likely out of luck and need to pay your difference.
And why you can’t get out of paying a penalty for your lack of health coverage on your 2014 taxes, you can avoid penalties outright by obtaining insurance through the Individual Open Enrollment Period, which still open through February 15.