New Level of Shared Responsibility Penalty

Don’t let this one get out of hand

UninsuredA part of the Affordable Care Act is the enactment of a tax penalty if you or your family does not have qualified health insurance coverage for the entire year. The new tax penalty, called the “shared responsibility payment” impacts taxpayers beginning in 2014. While the payment may have been manageable in 2014, it is going up quite a bit in 2015. Here is what you need to know.

Shared Responsibility Payment Calculation

greater of
2014 NEW! 2015 Change
Flat Fee
(or)
$95.00 per adult
$47.50 per child
$285 maximum flat fee
$325.00 per adult
$162.50 per child
$975 maximum flat fee
+$230 per adult
+$115 per child
+$690 maximum flat fee
Cap Fee 1% of your yearly household income capped at the cost of the national average premium of the bronze level health plans available through the marketplace.* 2% of your yearly household income capped at the cost of the national average premium of the bronze level health plans available through the marketplace.* * Average premiums vary by state. No one knows what the new average will be, but it is expected to go up a minimum of 6%.

Note: If premiums are more than 8% of household income or the gap in coverage is less than three consecutive months or there is an approved hardship then the shared responsibility payment could be reduced.

Action to take

Arrow Get coverage. If you are currently uninsured, each month you delay in getting coverage increases the amount of the penalty you will be required to pay.
Arrow Plan for the penalty. If you know the penalty is coming, save money to make this payment when you file your tax return.
Arrow Shop around. Check with your employer and/or state agencies to see about available coverage. There are often programs and assistance available to make getting health care more affordable for most of us.

Summer Child-Care Tax Opportunity

Summer Childcare

For millions of working parents the summer comes with the added challenge of finding care for their summer vacation bound kids. School hours need to be replaced with child-care hours.

With summer underway, you probably now have the child-care summer gap covered. There is a good chance this care could be tax deductible using the Child & Dependent Care Credit.

Qualifications for the credit

To take advantage of this tax savings opportunity you must meet the following qualifications.

Check You have: one or more dependent children under the age of 13
Check You have: earned income (wages, salary, tips or business income)
Check You are: single or married filing a joint tax return
Check You have: qualified day care expenses
Check You are: financially supporting and maintaining a home for your dependent child
What you should know

Most taxpayers that use this tax credit each year have their tax moves down. Those who use day care to bridge the summer gap could have a $3,000 to $6,000 tax credit if you organize now. To receive the credit:

Arrow The care must be provided so you can work. The care can also qualify if you are looking for work.
Arrow The care does not have to be at a facility. This means day camps, day care, and nanny care qualify. However, overnight camps or summer school costs do not qualify.
Arrow If married, both spouses need to work. There is some leeway if one spouse is a full-time student or is disabled.
Arrow You need to keep records. You need to have receipts for the care expense and you will have to report the caregiver’s tax information (name, address, and tax id/Social Security number) to receive the credit.
Arrow The care payment needs to qualify. You may not pay a dependent or your spouse to care for your children. But beyond this, who you pay is flexible.
The Child & Dependent Care Credit can allow you to deduct 20 – 35% of your summer child-care expense if you plan accordingly. Other details may apply so please call if you wish to discuss how this tax opportunity may work for you.