Individual Shared Responsibility Penalty How it is Calculated FTB

If taxpayers owe a Shared Responsibility Payment for tax years before 2019, the IRS may offset that liability with any tax refund that may be due to them. The IRS routinely works with taxpayers who owe amounts they cannot afford to pay. This sometimes includes enforced collection action such as liens and levies. However, the law prohibits the IRS from using liens or levies to collect any SRP. If taxpayers owe the SRP, the IRS may offset that liability with any tax refund that may be due to them.

A shared responsibility payment is a penalty assessed on individuals who don’t have health insurance, or large employers who don’t offer affordabled, comprehensive coverage to their full-time employees. The ACA’s individual shared responsibility penalty was eliminated after the end of 2018, under the terms of the Tax Cuts and Jobs Act that was enacted in late 2017. But people who were uninsured in 2018 still owed the penalty when they filed their tax returns in 2019. You may be exempt from the requirement to maintain minimum essential coverage and thus will not have to make a shared responsibility payment when you file your return if you meet certain criteria. The provision applies to individuals of all ages, including children.

  1. Through tax year 2018, taxpayers were also required to report health care coverage, qualify for an exemption from coverage, or make a shared responsibility payment for months without coverage or coverage exemption when filing his or her federal income tax return.
  2. You then adjust that full payment according to how long you were without insurance.
  3. When you file your tax return, enter your ECN on Form 8965 in column C of Part I, Marketplace-Granted Coverage Exemptions for Individuals.
  4. New Jersey, DC, Rhode Island, and California implemented individual mandates and penalties due to the elimination of the federal penalty after the end of 2018.
  5. The payment is capped at the national average premium for bronze level coverage.

This Google™ translation feature, provided on the Franchise Tax Board (FTB) website, is for general information only. Some of the figures used in determining the payment, such as the filing threshold for your filing status, are indexed to inflation. The estimator is updated annually as these figures are published. The adjustments are generally made at the end of the calendar year or beginning of the new one. For the 2015 tax year, the average penalty paid by those 6.5 million filers was $470.

You start by calculating your “full” shared responsibility payment — how much you’d owe if you were uninsured all year. You then adjust that full payment according to how long you were without insurance. For example, if your full shared responsibility payment was $480 and you were uninsured for half the year, you would pay half of that $480, or $240. In most cases, you’ll calculate and make your shared responsibility payment when you file your income tax return.

Individual shared responsibility provision

The Taxpayer Advocate Service developed the Individual Shared Responsibility Provision – Payment Estimator to help you estimate the amount you may have to pay if you did not have minimum essential coverage during the year. See the instructions to Form 8965, Health Coverage Exemptions, for more information including examples. To help estimate the amount of your payment, check out the Individual Shared Responsibility Payment Estimator.

For tax year 2019 and 2020 returns

In short, it says you must either have basic health insurance, receive an exemption or pay a penalty. The law refers to this penalty as a “shared responsibility payment;” the Supreme Court has ruled that the penalty is a federal tax. You, your spouse and your dependent children do not have to be covered under the same policy or plan.

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The payment for 2016 – 2018 is $695 per adult and $347.50 per child (up to $2,085 for a family), or it’s 2.5% of your household income above the tax return filing threshold for your filing status – whichever was greater. You would have paid 1/12 of the total fee for each full month in which a family member went without coverage or an exemption. Today, the Treasury Department and Internal Revenue Service (IRS), as well as the Centers for Medicare & Medicaid Services at the Department of Health and Human Services (HHS), issued two sets of proposed regulations. The regulations explain the shared responsibility provision and lay out the eligibility rules for receiving an exemption and the process by which individuals can receive certificates of exemption. In most of the U.S., people are no longer subject to a shared responsibility payment/penalty if they don’t have health insurance. But going without health coverage isn’t a great idea, even if you’re not directly penalized for it.

In short, you’ll either pay 1% of your income for each month without coverage, or $204 as a family. If you answered no, then just write in the lowest amount, which will be $285 or less. This is deducting the filing threshold from your MAGI, to ensure you don’t pay the fee on income below the filing threshold. If the Marketplace grants your coverage exemption, they will send you a notice with your unique Exemption Certificate Number or ECN. The Patient Protection and Affordable Care Act signed in 2010 imposed a health insurance mandate to take effect in 2014. On June 28, 2012, the Supreme Court of the United States upheld the health insurance mandate as a valid tax within Congress’s taxing power in the case National Federation of Independent Business v. Sebelius.

Short coverage gap means a continuous period of less than three months in which the individual is not covered under minimum essential coverage. For a family of four, the national average bronze premium for one month is $1,132. The examples below are used only to represent the mechanics of calculating the payment and are not estimates of current or future health insurance premium costs. For information on the cost of bronze level plans, visit Here you are figuring out what the national average premium for a bronze plan ($204 a month for 2014) would be for the number of months your family went without coverage. This is the maximum anyone can owe for going without coverage.

For additional information about how to get exemptions that the Marketplace may grant, visit Finally, the penalty will not be imposed if the applicable individual did not have coverage for a continuous period of three months or less. If there is more than one such continuous period in a calendar year, the exception provided will only apply to months in the first of those periods. If you or any of your family members were not covered under minimum essential coverage for a month, review the exemption information on to see if you may qualify for an exemption. If the individual does not have minimum essential coverage for a continuous period of three or more months, none of the months included in the continuous period are treated as included in a short coverage gap.

A few years later, in late 2017, the Tax Cuts and Jobs Act was enacted, calling for the eventual elimination of the individual mandate penalty. The penalty calculations remained unchanged for 2017 and 2018, although the maximum penalty amounts (which are based on the average cost of a bronze plan) grew each year as health insurance premiums increased. As of 2019, Massachusetts, DC, and Rhode Island were the three top-rated states in terms of the percentage of their population with health coverage. And although California and New Jersey were more middle-of-the-road, they both had lower uninsured rates than the national average. If a calendar year includes more than one short coverage gap, the exemption only applies to the earliest short coverage gap. Employer-sponsored coverage generally is minimum essential coverage.

However, the first period without coverage – August and September – is a short coverage gap, which qualifies the family for an exemption from the payment. Jim’s annual national average premium for bronze level coverage for 2014 is $2,448. Because $298.50 is greater than $95 and is less than $2,448, Jim’s shared responsibility payment for 2014 is $298.50, or $24.87 for each month he is uninsured (1/12 of $298.50 equals $24.87).

These examples are provided to assist you to understand how the individual shared responsibility provision and the payment works. If you can claim the coverage exemption on your tax return, you do not need to apply for a Marketplace-granted exemption. If you qualify for an exemption, you won’t have to pay the shared responsibility payment.

If you can’t check the box, you generally must report a shared responsibility payment for each month that you, your spouse (if filing jointly), or someone else you can or do claim as a dependent didn’t have qualifying health care coverage or a coverage exemption. You only make a payment for the months you or your individual shared responsibility payment dependents did not have coverage or qualify for a coverage exemption. Under the ACA, the government, insurance companies, employers and individuals all share responsibility for keeping health coverage available and affordable. The individual shared responsibility provision outlines individuals’ role in this.

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