Health Care Law's Tax Penalty

[kcjenkins]

The U.S. health care law’s tax penalty for not carrying medical coverage next year may catch millions of Americans off-guard.

While the open enrollment period for people to obtain health care through the insurance exchanges runs until March 31, some people may face tax penalties for lack of coverage if they wait until the final days to sign up, Bloomberg BNA reported.

However the most the IRS can to as a penalty is withhold your tax refund. They can't garnish your wages or send you to jail.

Plans purchased between March 1 and March 15 wouldn’t take effect until April and coverage bought in the final days of March wouldn’t kick in until May. The Patient Protection and Affordable Care requires most Americans have an active health insurance policy by March 31 or pay the higher of 1% of their annual income or $95.

“We’ve noticed some interesting chemistry” between these two requirements, said Brian Haile, senior vice president for health policy with Jackson Hewitt Tax Service Inc.

Under the ACA, starting Jan. 1, people who have access to affordable coverage and instead remain uninsured for more than three consecutive months will owe the “individual responsibility” tax payment for those months, a Department of Health and Human Services spokeswoman told BNA in an e-mail.

That means an uninsured person eligible for the tax credits must have coverage effective by March 1, 2014, to avoid the penalties, Haile said. The Congressional Budget Office estimates that 6 million people will pay the penalty in 2016.