Although I don't expect you to repeat your seminar here, LdiJ (although that would be interesting), could you provide a few details of some of the "ugliness" that taxpayers can expect if they were uninsured?
I am curious.
Thanks.
The "discount" that one receives for purchasing health insurance on the exchange is not actually a discount. Its a tax credit that you receive in advance, that is paid directly to the insurance company. On your tax return you have to reconcile the credit. The estimated credit is based on your 2013 (for this year) income/dependents as reported on your tax return, but the actual credit is based on your 2014 income/dependents.
So, divorced dad ordered to provide health insurance for the children. He and mom are ordered to get the exemption for the children every other year. He buys insurance on the exchange and receives a credit of 8k towards the insurance. However, for 2014 its mom's year to claim the children. Therefore, when dad does his taxes he ends up not being eligible for the credit he has already received and has to pay it back. (with limitations) Mom on the other hand, because she does get to claim the children is eligible for the credit, and its a refundable credit, so she gets a big additional refund. Now, there is a method where mom and dad can agree to share the credit...but they have to seriously agree and cooperate to make it work...
Then, there is the situation where mom and dad are not divorced or separated. Dad is unemployed at the beginning of the year and purchases insurance on the exchange and gets a large credit. Dad finds a job mid year making decent money and mom and dad no longer qualify for the credit. Mom and dad have to pay back (with limitations) the credit when they do their taxes.
For those who are uninsured, it is necessary to report information on your tax return on a monthly basis and you must fill out a separate form for each person in your family. So, if you are a family of 6, and you do not have health insurance, you must fill out 6 forms, detailing on a month to month basis the situation with health insurance for each member of the family. The same applies if you were only partially insured. You pay a penalty for not having insurance. Now, there are lots of potential exemptions from the penalty, but those exemptions have to be proven on a month to month basis...and won't necessarily apply across the board for every member of your family.
A 55 year old grandmother making 50k a year does not have health insurance and is not required to pay a penalty because even on the exchange health insurance is not "affordable" (more than 8% of her annual wages). However, her adult daughter and grandchildren move in mid year and she ends up supporting them. Therefore she claims them as dependents on her tax return. That changes the size of her family for the purpose of health insurance and therefore she is no longer eligible for the exemption, and is penalized for not having health insurance. Her financial situation did not improve, it actually got much worse, but suddenly its "affordable".
Your teenage child works part time and makes enough money that they actually have to pay a small amount of tax. Because they are your dependent you have to include their wages on your tax return as part of the calculation for your insurance tax credit/penalty/affordability.
If someone claims their significant other as a dependent because their significant other didn't work...they are now responsible if their significant other is uninsured.
This changes the whole dynamics of taxes as regards to dependents. It creates a whole additional level of battle for divorced and separated parents. It makes tax returns infinity more complicated to prepare.
I am a bit frustrated by the whole situation because this is the first that we have been able to see the nuts and bolts of the situation and its worse than I imagined.
