The IRS has provided several examples for computing the Shared Responsibility Payment in an August 2013 federal register outlining specific Affordable Care Act rules and regulations for those not maintaining the required Minimum Essential Coverage.
The following chart is a good reference but is overly simplistic:
Your situation may be different than the above guidelines. As you can see, it doesn’t show the fine for children nor does it address the penalty for being uninsured for less than a full year. In addition, your income may differ from MAGI.
Examples may help you understand how to apply the law’s rules in order to compute any possible fine you may face. You can get a better understanding by looking at 3 situations below but be sure to use our calculators!
A taxpayer named Mr. G has minimum essential coverage in 2016 from January 1st through March 2nd. After March 2nd, Mr.G does not have coverage until Mr. G enrolls in an eligible employer sponsored plan being effective on June 15th. Under the law, Mr. G has minimum essential coverage for January, February, March, and June through December.
Mr. G’s continuous period without coverage is just 2 months, April and May of 2016. These two calendar months constitute a short term coverage gap and no Obamacare fine applies. A penalty is not applicable and nothing needs to be calculated.
A taxpayer named Mr. P is incarcerated from January 1st though June 2nd. Mr. P enrolls in an employer-sponsored plan effective September 15th. Mr. P is exempt from the period from January through June under the Affordable Care Act’s exemptions.
Mr. P’s continuous period without minimum essential coverage is 2 months, July and August. These two months are considered to be an acceptable coverage gap since the period is only 2 calendar months. No Obamacare fine would apply to Mr. P in this case.
A taxpayer named Ms. H, an unmarried person with no dependents, has minimum essential coverage for the period from January 1st though October 15th, 2016. Ms. H is without coverage until February 15th, 2017. Ms. H files her Federal income tax return for 2016 on March 10th, 2017.
Under the law, November and December of 2016 are treated as a short coverage gap. However, November and December are included in the continuous period, a straddle, that includes January of 2017. There is no Obamacare fine for the 2016 tax year. For 2017, Ms. H would be assessed a penalty based on the little known straddle rule.