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Individual and Employer Mandate Penalty Estimator Tools

Posted on July 7th, 2016

It should be pretty clear by now that two of the biggest provisions of the Affordable Care Act (ACA) are the Individual and Employer Mandates. The Individual Mandate requires all Americans to have a health insurance plan or pay a penalty, unless an exemption applies. Factors that may influence the amount of the Individual Mandate penalty include household size and income. The Employer Mandate requires employers with 50 or more employees to offer health insurance coverage to at least 95% of its full-time employees or risk penalties. In addition, the coverage must meet a certain level of benefits, referred to as minimum value, and the coverage must be considered affordable, or the employer risks paying a different penalty under the Employer Mandate. 
It can be complicated to determine if a penalty may apply, as well as how to calculate the amount of the penalty. As a result, the Taxpayer Advocate Service (TAS), an independent organization within the Internal Revenue Service (IRS), has created two estimator tools to help individuals and employers determine potential penalty payments. 
  • Provides general information about the Individual Mandate
  • Includes a list of qualified exemptions
  • Requires certain data to be entered to estimate the amount of the penalty
  • Provides general information about the Employer Mandate
  • Helps to determine the total number of employees (full-time plus full-time equivalent)
  • Helps to determine if an employer is an applicable large employer subject to the Employer Mandate
  • Requires certain data to be entered to determine the maximum potential penalty
Keep in mind, these tools are just estimators and are not definitive of penalty payments that may be owed. The exact Individual Mandate penalty amount is determined when a person files their federal income tax return. The exact Employer Mandate penalty amount is determined after an employer submits Section 6056 reporting to the IRS (Forms 1094-C and 1095-C). 
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The materials contained within this communication are provided for informational purposes only and do not constitute legal or tax advice.   

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