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What is the individual shared responsibility payment?

You could be liable for a fine if the ACA doesn’t recognise your insurance coverage. Check if your plan should be MEC compliant here.

An important aspect of the Affordable Care Act is the requirement of some to have health insurance cover. If you choose not to have health insurance, or choose a plan that does not

meet the Minimum Essential Coverage (MEC) set out by the ACA when you are required to do so, you may find yourself subject to an Individual Shared Responsibility Provision penalty by the Internal Revenue Service (IRS).

 

Who has to pay the fine? 

Penalties are assessed on US taxpayers (both living in and outside of the US) and is enforced by the IRS through your tax returns. Filers will be sent a 1095B statement by their insurer to prove MEC cover, or to apply for an exemption (in the case of bona fide foreign residents filling out annual tax returns).

The filer is also responsible for any penalties for dependents claimed on their tax returns.

 

How is it applied/calculated?

In 2016, the individual shared responsibility provision is calculated one of two ways:

  • Per person - USD 695 per adult and USD 347.50 per child (up to a maximum of USD 2,085 for a family); or

  • As a percentage of your household income - 2.5% for your household income above the tax return filing threshold of your filing status (the maximum is to be determined, as this is calculated on the total yearly premium for the national average price of a Bronze plan sold through the Marketplace).

The penalty applied is whichever is greater.

The penalties are calculated monthly, based on a per month rate of 1/12th of your annual penalty for each month you were uncovered. Gaining coverage for just one day counts as coverage for the entire month, and no penalty is applied for up to 2 uninterrupted months without coverage in one tax year.

For information on penalty provisions from previous years, please visit the US Government Healthcare website.

 

How do I pay it?

You pay the fee when you have filed your federal tax return for the year. This will be calculated by filling out form 8962 (Premium Tax Credit, available here), attaching it to your tax return (the 1040 form individuals are required to fill out, example from 2015 here), and putting the amount you will need to pay in the relevant line on your 1040. For example, with the normal 1040 you will first fill out form 8962 to calculate how much you owe, and then take this amount and put it in line 69 of the 1040.   

 

Can I be exempt?

Exemptions from being required to obtain an MEC compliant plan are available for a number of circumstances, including:

  • Certain hardships

  • Some life events

  • Health coverage or financial status

  • Membership to certain groups

To find out more about exemptions, please visit our Exemptions page here.

 

What if I don’t pay the fee?

If you owe an individual shared responsibility payment and have not paid it, the IRS will collect the fee from any future tax refunds. They cannot enforce the provision with jail time, deportation, or any other methods of collection.

 
 

Examples

 

Expatriate Family of Four

Family of 4

 

Annual Household Combined Income: USD $200,000

Per person

  • $695 per adult x 2; and

  • $347.50 per child x 2

Total penalty: $2,085

 

Percentage of Household Income

  • 2.5% of income over tax-filing threshold*

Total penalty: $4,485

* Assumes $20,600 tax filing threshold

Check mark

 
 

Single Expatriate

Single expat

 

Annual Household Combined Income: USD $100,000

Per person

  • $695 per adult

Total penalty: $695

 

Percentage of Household Income

  • 2.5% of income over tax-filing threshold*

Total penalty: $2,225

* Assumes $20,600 tax filing threshold

Check mark

 

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