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Highways to PPACA tax penalty freedom

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The Internal Revenue Service (IRS) today put out a plea for consumers and their tax preparers to look on for advice about exemptions from the Patient Protection and Affordable Care Act (PPACA) individual mandate penalty.

PPACA now requires many individuals who failed to have minimum essential coverage (MEC) throughout 2014 to pay a penalty equal to at least $95, and 1 percent of income, up to a maximum of $2,448 per individual, or $12,240 per “shared responsibility family.” 

IRS officials noted, near the bottom of their notice, that taxpayers can get some exemptions simply by filling out special tax forms, or even by checking boxes on the tax forms they usually file, but that a taxpayer has to go through the local state exchange to get an “exemption certificate number” (ECN)

In other words: Some exemptions are much more exempt than others.

Some may require individuals who want an exemption mainly because they hate the thought of dealing with a PPACA exchange to go through an unusual exchange review process that may seem somewhat strange and confusing even for the exchange personnel responsible for processing the application.

The IRS shows which exemptions require an ECN, and which let taxpayers get exemptions without exchange involvement, in the 2014 Instructions for Form 8965. The second page of the Form 8965 instructions summarizes what consumers have to do to qualify for each exemption.

For a look at the exemptions that leave taxpayers free from the ECN requirement, which require an ECN, and which can be claimed either through an exchange application or through tax forms, read on.

Form 1040

Tax return only

  • Income below the filing threshold.

  • Coverage considered unaffordable.

  • Short coverage gap.

  • Citizens living abroad and certain noncitizens.

  • Aggregate self-only coverage considered unaffordable.

  • Gap in coverage at the beginning of 2014.

  • Gap in Children’s Health Insurance Plan (CHIP) coverage.

  • Resident of a state that did not expand Medicaid.

  • Limited benefit Medicaid and TRICARE programs that are not minimum essential coverage.

See also: IRS completes health penalty rules


ECN only

  • Members of certain religious sects.

  • Determined ineligible for Medicaid in a state that did not expand Medicaid coverage.

  • General hardship.

  • Coverage considered unaffordable based on projected income.

  • Unable to renew existing coverage.

  • AmeriCorps coverage.

See also: Lawmaker blasts PPACA tax forms

Paths split

ECN or tax return

  • Members of a health care sharing ministry.

  • Members of Indian tribes.

  • Incarceration.

See also: Jail and prison are different and Feds explain individual mandate exemptions


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