Individuals and Families Internal Revenue Service

Hardship exemptions are one type of exemption that someone can claim to qualify for Catastrophic coverage, along with affordability exemptions. According to the Congressional Budget Office, less than two percent of Americans are expected to owe a shared responsibility payment. To determine the exact payment, use the Shared Responsibility Payment Worksheet in the Instructions for Form 8965 and report it on your Federal tax return. Check the Covered box for all family members that were covered under minimum essential coverage at the beginning of the year. Some of the figures used in determining the payment, such as the filing threshold for your filing status, are indexed to inflation. The adjustments are generally made at the end of the calendar year or beginning of the new one.

Avoiding the penalty

1. If you file a return, you will need to complete Form 8965, Health Coverage Exemptions, and attach it to your return.
2. The threat of the shared responsibility payment is meant to motivate employers to offer health insurance to their employees and motivate uninsured individuals to get health insurance.
3. For family members who are not exempt, the taxpayer will indicate whether they had insurance coverage.
4. If a calendar year includes more than one short coverage gap, the exemption only applies to the earliest short coverage gap.
5. The individual shared responsibility provision requires each individual to have qualifying health care coverage (known as minimum essential coverage) for each month.
6. Only select the months where you or a family member is not covered the entire month.

Such exemptions could be provided either through a Heath Insurance Marketplace or through the tax filing process. You, your spouse and your dependent children do not have to be covered under the same policy or plan. However, you, your spouse and each dependent child for whom you may claim a personal exemption on your federal income tax return must have minimum essential coverage or qualify for an exemption, or you will owe a shared responsibility payment when you file a return. The HHS final regulation https://turbo-tax.org/ provides that the religious conscience exemption and most categories of the hardship exemption are available exclusively through a Marketplace. In addition, certain subcategories of the hardship exemption will be available exclusively through the tax filing process. The rule provides a choice to individuals for the exemptions in the three remaining categories – members of a health care sharing ministry, individuals who are incarcerated, and members of federally recognized Indian tribes.

Government Shared Services

To report an exemption granted by the Marketplace or to claim an exemption with the IRS, you will need to complete IRS Form 8965, Health Coverage Exemptions, and file it with your tax return. If you are covered under minimum essential coverage for at least one day in a month, you are not subject to the payment for that month. Only select the months where you or a family member is not covered the entire month. The household income you entered is below the filing threshold for for your filing status.

Financial Markets, Financial Institutions, and Fiscal Service

The Affordable Care Act created both of these penalities, but the penalty for individuals was reset to $0 as of 2019. Some states do still have assess a shared responsibility penalty on residents who don’t have health coverage, but most do not. If any of the full-time employees get subsidies (tax credits) to help them buy health insurance from a health insurance exchange, their individual shared responsibility payment employer is subject to a tax penalty, assessed by the IRS. This article will explain how the individual and employer shared responsibility payments work, when they’re applicable, and what consumers need to know about them. A Form 1040 return with limited credits is one that’s filed using IRS Form 1040 only (with the exception of the specific covered situations described below).