Individual Shared Responsibility Provision and Income Tax Return: An Overview

Health insurance policy

The Individual Shared Responsibility Provision is an individual mandate designed with an aim to improve the quality and affordability of health insurance coverage in the US. One of the many Affordable Care Act tax provisions,  requires individuals to have a certain amount of health care coverage or minimum essential coverage (barring few exemptions), when filing the annual federal income tax return. People who do not have a minimum essential coverage or who do not qualify for the coverage exemption are required to pay a fine in the name of the individual shared responsibility payment. In this blog post, we take a closer look at the Individual Shared Responsibility Provision and its highlights. Let’s begin.

Whom Does the Provision Affect?

The Individual Shared Responsibility Provision applies to all individuals, including senior citizens, children, and resident aliens living in the US. Foreign nationals who decide to not become a resident alien, however, are exempt from the individual shared responsibility payment. Other individuals not required to bear the individual shared responsibility payment include:

  • Nonresident aliens
  • Dual status aliens or nonresident aliens who file a joint return with a U.S. spouse
  • Aliens who have both a resident and nonresident status during their first year in the US
  • Individuals who file a Form 1040NR-EZ or Form 1040NR
  • Individuals who are both non-US citizens and not lawfully present in the US

Minimum Essential Coverage

Applicants who have a minimum essential coverage must indicate it by checking a box on Form 1040, 1040A, or 1040EZ. Elements that come under the minimal essential coverage include:

  • Medicare Part A and Medicare Part C (also known as Medicare Advantage)
  • Most types of TRICARE coverage under chapter 55 of title 10 of the United States Code
  • Most employer-sponsored coverage, including COBRA, retiree, and self-insured plans
  • Coverage under an expatriate health plan
  • Most medicaid coverage
  • Children’s Health Insurance Program or CHIP coverage
  • Coverage provided to Peace Corps volunteers

Coverages that provide limited benefits do not fall under the minimum essential coverage. These include:

  • Medicaid coverage only related to pregnancy
  • Medicaid providing only family planning services
  • Medical for only tuberculosis-related services
  • Coverage limited to benefits such as
    • Dental or vision care
    • Worker’s compensation
    • Accident or disability policies

Coverage Exemptions

Applicants who do not qualify for the minimal essential coverage, but meet certain criteria, can file Form 8965, Health Coverage Exemptions, to skip the individual shared responsibility payment. These conditions can be the following:

  • You did not have a coverage for 3 consecutive months
  • You are a member of the health care ministry
  • You are a member of a religious sect that does not accept any insurance benefits
  • You are a member of the federally recognized Indian tribe
  • Suffered a hardship that makes it impossible to obtain a coverage
  • In jail, or some other correctional facility
  • Lawfully absent in the country and not a U.S. citizen or U.S. National

The Bottom Line

Applicants or any of their family members who do not have a minimum essential coverage, or qualify for a coverage exemption for any month, must bear the individual shared responsibility payment when they file their income tax return. Determining this payment depends on the total household income, age, and certain other factors. You may seek a meeting of a no-obligation consultation with Attorney, Nick Nemeth, to find out the exact requirements applicable to you and learn about any other prerequisites that may be a part of the equation. Nick Nemeth and his team can also assist you with all IRS tax issues. You can reach us at our  toll-free number: (888) 890-0523, or fill out this contact form to schedule an appointment.

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