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Millions face tax penalties under healthcare law

The “individual mandate” penalizes those without health insurance.
The “individual mandate” penalizes those without health insurance. AP archives

An estimated 3 million to 6 million households that file 2014 income tax returns might incur penalties this tax season for failing to secure health insurance last year under the Affordable Care Act.

Senior officials at the Treasury and Health and Human Services departments wouldn’t confirm the estimates during a telephone briefing Wednesday.

They did say 2 to 4 percent of an estimated 150 million taxpayers are likely to be penalized.

Last year, the health law’s “individual mandate” required for the first time that most Americans obtain health insurance or face a penalty equal to 1 percent of their annual household income, or $95 per adult and $47.50 per child — whichever is higher.

The 2015 penalty, which will be levied next year, jumps to 2 percent of income, or $325 per person.

In 2016, it rises to 2.5 percent of household income, or $695 per person.

An estimated 25 percent of income tax filers didn’t have health coverage for all or most of last year, officials said. That’s roughly 37.5 million taxpayers.

Some will face no penalties by claiming any number of exemptions to the mandate, based on religious affiliation, immigration status, income and other factors.

Some who received tax credits to help buy their 2014 marketplace coverage might face a partial or complete loss of income tax refunds — or end up owing the government money — if the income estimate used to calculate their subsidy is below their 2014 earnings.

It’s unclear how many people might be subject to these penalties, but tax credits were distributed to an estimated 3 to 5 percent of tax filers last year, officials said.

Marketplace plan members were instructed to notify their insurers and Health and Human Services when their incomes or life statuses changed so that their tax credits could be adjusted accordingly.

Doing so would lessen the likelihood of surprising financial penalties when they filed their taxes. Changes that could trigger subsidy adjustments include relocation, marriage, a job loss or a large pay raise.

Those who had individual marketplace coverage last year will get a new federal income tax form — 1095-A — that must be filed with their 2014 returns.

The Obama administration is partnering with large tax preparation businesses and nonprofit organizations to help spread awareness of and answer questions about the health insurance tax provisions.

Taxpayers with additional questions can contact Health and Human Services call centers at 800-318-2596.

While some consumer confusion is inevitable as tax season swings into high gear, the agency is ready for the challenge, said Andy Slavitt, principal deputy administrator at the Centers for Medicare and Medicaid Services.

“We’re not going to predict how things are going to go … but we feel as good as we can” about preparations for tax season, Slavitt said.

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