By John H. Barkley, Esq of Shustak Reynolds & Partners, P.C. posted on Tuesday, July 29, 2014.

John H. Barkley Esq.

Partner

Affordable Care Act Update: IRS publishes figures and methods regarding Individual Mandate penalties.

One of the key components of the Patient Protection and Affordable Care act is the requirement that every individual have minimum essential coverage from some form of health insurance.  If any person fails to obtain coverage, they must pay a penalty determined under IRC § 5000A.

The methods for calculating the penalty are fairly complex and depend highly on taxpayers’ individual cases.

This past Wednesday, July 23, 2014, the IRS published Revenue Procedure 2014-46 which sets forth important figures for determining the amount of a taxpayer’s liability under IRC §5000A.

There are essentially three (3) calculations that happen to determine a taxpayer’s penalty, and Wednesday’s Revenue Procedures lay out important numbers for one of those methods called the “National Average Premium Method.”

Under the National Average Premium Method (NAPM), the penalty is equal to the average monthly premium for each individual the taxpayer is responsible for, up to a maximum of five (5) people.

In Rev. Proc. 2014-46, the IRS set that figure at $204 per individual, per month for 2014, up to a maximum of $1,020 per month for families of (5) or more.

As mentioned earlier, there are two other methods which may apply to any particular taxpayer.

For anyone considering whether or not they should forego purchasing health insurance and simply accept the penalty, it would be wise to consult with your tax advisor to avoid some sticker shock come tax time.

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