This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Despite What White House Says, Obamacare Tax Is Here

NEW YORK (TheStreet) -- Late last week, commentator Matt Drudge received a swift rebuke from the White House and many others after he claimed that he had begun to pay the Obamacare individual mandate tax.

Because that tax is not due until 2015 for those who lack health insurance coverage this year, his proclamation that he had paid the self-termed "Liberty Tax" was widely seen as a farce.

Unfortunately, his claim turned out to be true. Many of us who are self-employed pay Uncle Sam via quarterly estimated tax payments for the following year, which are due in April, June, September and January. These payments often include not just federal taxes, but also a self-employment tax comprised of Medicare and Social Security taxes and other taxes. The individual-mandate tax happens to be one of those in the "other" category.

In calculating the amount of tax owed, you must fill out Form 1040-ES, which includes several pages of instructions, vouchers for each quarterly payment and a somewhat complicated worksheet used to calculate the payments.

Line 12 of the worksheet is for "other taxes." While there is no specific mention of the Obamacare penalty on that line, it does refer you back to the instructions. There, on page two, there's a list of what's new in 2012. Under the section "Health Care Coverage" is the following:

When you file your 2014 tax return in 2015, you will need to either (1) indicate on your return that you and your family had health care coverage throughout 2014, (2) claim an exemption from the health care coverage requirement for some or all of 2014, or (3) make a payment if you do not have coverage or an exemption(s) for all 12 months of 2014. For examples on how this payment works, go to www.IRS.gov/aca and click under the "Individuals & Families" section. You may want to consider this when figuring your "Other taxes" on Line 12 of the 2014 Estimated Tax Worksheet. For general information on these requirements, go to www.IRS.gov/aca.

It appears as though the critics, who lack a basic understanding of how the self-employed pay their taxes, jumped the gun on this one. The individual-mandate tax is here, and technically those who pay estimated taxes and lack health insurance or an exemption are now on the hook.

The taxes for those lacking coverage under the "Shared Responsibility Provision" of the Affordable Care Act are the following:

The greater of:

  • 1 percent of your household income that is above the tax return filing threshold for your filing status, or
  • Your family's flat dollar amount, which is $95 per adult and $47.50 per child, limited to a family maximum of $285,
  • But capped at the cost of the national average premium for a bronze level health plan available through the Marketplace in 2014.

However, that's just the beginning as the penalties will increase to 2% of household income (or $325 per adult and $162.50 per child) in 2015 and 2.5% (or $695 per adult and $347.50 per child) in 2016. From there, increases are based on inflation.

Like it or not, the individual-mandate tax is here.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs