Hi guys,

I hope that you had a great summer and are ready for the fall!  It’s my favorite time of the year (other than tax season) primarily because I like dressing in layers and love fall fashion.  The fall also is the beginning of the open enrollment season for the new health care law.

Let’s break this thing down.  First things first!  Most citizens and lawful residents of the United States and their dependents will need to have health insurance beginning January 1, 2014 or face a penalty in the form of a tax.  Open enrollment for the health insurance marketplace begins October 1, 2013 and ends March 31, 2014. Coverage won’t begin until January 1, 2014.

Most of my clients live in the state of Georgia. The state of Georgia opted out of offering a state exchange for the health care law.  Don’t despair this just means that Georgians will need to use the federal exchange.  Go to www.healthcare.gov to shop the health insurance marketplace beginning October 1, 2013. Agents are available 24 hours a day 7 days a week to answer your questions and help you. There is even a live chat option if you are not keen on calling to speak to an agent via phone.

The health insurance marketplace is a place to compare, review, and choose the plan that is right for you and your family. Lower income individuals may be eligible for health insurance premium assistance in the form of a health care subsidy. A health care subsidy is a payment for your health care coverage that is provided by the government based on your income and the size of your family.  Some people will be eligible for low cost or in some cases zero deductible premiums because of the subsidy. There may be co-pay assistance available as well.

If you don’t have coverage in 2014, you may be assessed a penalty.  The penalty is a tax that will be calculated based on your income and the number of people in your household (or on your tax return claimed as dependents). Next year, the penalty will be $95 or 1% of your annual income per person in your household (whichever is greater).  And the penalties go up each year. In 2015, the penalty is $325 or 2% of your annual income.  In 2016, the penalty increases to $695 or 2.5% of your annual income. Post 2016, the penalty will be adjusted for inflation each year. Penalties include each month that you don’t have coverage for yourself and your dependents.  So if you claim your sister and her children on your tax return, you will also need to provide them with health insurance or face the penalty for each of them.

I suspect that everyone will receive a W2 or some other kind of government form with the number of months of health insurance coverage during the year (even children) to track this and calculate the penalty at tax time.  Basically if you didn’t have coverage in 2013, you won’t be penalized on your tax return next year.  Having said that, if you don’t have coverage beginning January 1 of 2014 you will be assessed the penalty when you file your return in 2015.

Of course there are exceptions to the penalty.  If you just really can’t afford health insurance you can file for an exemption.  If you are a member of certain religious groups like the Amish or qualified Native American Indian tribes you can qualify for an exemption. And don’t worry if you are assessed the penalty the IRS cannot file a lien against you or file a garnishment against your wages.  The health care law prohibits the IRS from coming after you like they usually do for tax liabilities.  Of course this doesn’t prohibit the IRS from taking the payment from future tax refunds and they will charge interest and penalties.

If you already have health insurance, you don’t have to switch.  However, some taxpayers may opt to switch to an exchange because they may find that buying insurance through the exchange is less expensive. Self-employed individuals will find that the health insurance law is the answer to their prayers.  One of the biggest problems for self-employed people is obtaining and affording health insurance, especially if you have a preexisting condition.  As a result of the Patient Protection and Affordable Care Act, every self-employed person can obtain health coverage through an exchange, even those with preexisting conditions. Though I am not legally required to offer health insurance to my staff since I have fewer than 50 employees, I am excited that under the new law I will be able to do so.

There are a few other tax changes as a result of this law, and I will blog about them in more detail in the coming weeks.  I know that this is a lot to digest but stay tuned to my Tax Heiress blog, or subscribe to our new You Tube channel – Buffie the Tax Heiress for details.  I promise to keep you posted. I am also planning on hosting a free webinar to answer all of your questions for anyone who likes our Buffie the Tax Heiress page on Facebook, follows us on Twitter @Taxheiress, or subscribes to our You Tube channel – Buffie the Tax Heiress.  I will post the date and time of the free webinar on You Tube, Facebook, and Twitter.



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