Tuesday, April 14, 2015

How to get out of paying the Obamacare tax



The Obamacare tax is finally biting Americans this year, but it's mostly toothless....the majority of the uninsured won't end up having to pay up. This year at least, the penalty's bark is a lot worse than its bite. Here's why:

1. The IRS has only two ways to collect the tax.

There are only two ways the IRS can get the penalty from the uninsured: By taking it from their tax refunds or receiving it voluntarily. The agency isn't allowed to use other tools normally at its disposal, like garnishing wages or issuing liens, to collect the penalty for being uninsured.

"It certainly reduces the size of the stick the IRS has to prod people into getting coverage," said Bob Williams, a senior fellow with the Tax Policy Center....

2. The tax is bigger than most people think, but still relatively small this year.

Most taxpayers think the uninsured penalty is $95 this year, tax assisters say, since that's been the number most often reported in the media. That's far below the cost of insurance premiums, so in the minds of some it makes sense to pay the penalty instead.

But that's only part of the story. The uninsured must pay either $95 or 1 percent of income above the filing threshold, whichever is greater. That means someone earning $50,000 would pay about $400.

Some have wondered whether that's enough to prompt more to buy coverage. But the key question is what taxpayers actually believe, tax experts say. Because many people think their fine would be $95, the penalty may be less effective as a motivating tool than if they realized the full truth of the matter....