health care penalty question

[taxitc]

Father supports son who lives in son's own home. Son's total earned income in 2017 was $500. Son is 37. Will there be a
penalty for no insurance-if son does NOT have insurance and father wants the exemption?

[taxitc]

Father supports son who lives in son's own home. Son's total earned income in 2017 was $500. Son is 37. Will there be a
penalty for no insurance-if son does NOT have insurance and father wants the exemption?

Can someone help?

[Rapid Robert]

If father doesn't claim the son, son will likely qualify for one of the exemptions due to his income, therefore no penalty.

https://www.healthcare.gov/fees/fee-...being-covered/

I can't see where that link addresses the question.

Per instructions for Form 8965:

"Tax household. For purposes of Form 8965, your tax household generally includes you, your spouse (if filing a joint return), and any individual you claim as a dependent on your tax return. It also generally includes each individual you can, but don't, claim as a dependent on your tax return."

The dependent's income may not have to be included in household MAGI, but the dependent still needs coverage or an exemption no matter who claims.

[taxitc]

I can't see where that link addresses the question.

Per instructions for Form 8965:

"Tax household. For purposes of Form 8965, your tax household generally includes you, your spouse (if filing a joint return), and any individual you claim as a dependent on your tax return. It also generally includes each individual you can, but don't, claim as a dependent on your tax return."

The dependent's income may not have to be included in household MAGI, but the dependent still needs coverage or an exemption no matter who claims.

Their homes are miles apart. he does NOT live with his father. What is wrong with this picture?

[TaxGuyBill]

The dependent's income may not have to be included in household MAGI, but the dependent still needs coverage or an exemption no matter who claims.

I realize that is what the instructions say and what the preamble (the introductory discussion when they released the Regulations) to the Regulations say. However, for the most part, that is NOT what the Regulations say.

The Regulation says that if a non-exempt potential dependent can be claimed, the penalty applies even if not actually claimed. But if you look further in the Regs, most of the time the potential dependent would be an exempt person.

.

[Rapid Robert]

Well I totally missed the part about the son not living with the father. He is not part of his household, so no exemption deduction

Suggest you review definition of Qualifying Relative/Other for purposes of dependency exemption deductions.

[Rapid Robert]

I realize that is what the instructions say and what the preamble (the introductory discussion when they released the Regulations) to the Regulations say. However, for the most part, that is NOT what the Regulations say..

The taxpayer is liable for dependents. Dependents are not automatically exempt persons, because the term "household income" does not apply to them (they can't claim their own dependent exemption, therefore they do not have a "family"), therefore they cannot by definition meet the "Household income below filing threshold" coverage exemption.

Here are the relevant cites:


§1.5000A-1(c)(2) Liability for dependents—(i) In general. For a month when a nonexempt individual does not have minimum essential coverage, if the nonexempt individual is a dependent (as defined in section 152) of another individual for the other individual's taxable year including that month, the other individual is liable for the shared responsibility payment attributable to the dependent's lack of coverage. An individual is a dependent of a taxpayer for a taxable year if the individual satisfies the definition of dependent under section 152, regardless of whether the taxpayer claims the individual as a dependent on a Federal income tax return for the taxable year. If an individual may be claimed as a dependent by more than one taxpayer in the same calendar year, the taxpayer who properly claims the individual as a dependent for the taxable year is liable for the shared responsibility payment attributable to the individual. If more than one taxpayer may claim an individual as a dependent in the same calendar year but no one claims the individual as a dependent, the taxpayer with priority under the rules of section 152 to claim the individual as a dependent is liable for the shared responsibility payment for the individual.

§1.5000A-3(f)(1) In general. An individual is an [b]exempt individual[b] for any taxable year for which the individual's household income is less than the applicable filing threshold.

§1.5000A-1(d)(4) Family. A taxpayer's family means the individuals for whom the taxpayer properly claims a deduction for a personal exemption under section 151 for the taxable year.

§1.5000A-1(d)(10)Household income—(i) In general. Household income means the sum of—
(A) A taxpayer's modified adjusted gross income; and
(B) The aggregate modified adjusted gross income of all other individuals who—
(1) Are included in the taxpayer's family under paragraph (d)(4) of this section; and
(2) Are required to file a Federal income tax return for the taxable year.

§1.5000A-1(d)(17) Shared responsibility family. Shared responsibility family means, for a month, all nonexempt individuals for whom the taxpayer (and the taxpayer's spouse, if the taxpayer is married and files a joint return with the spouse) is liable for the shared responsibility payment under paragraph (c) of this section.

As I mentioned previously, under §1.5000A-1(d)(10), the dependent's income does not need to be included in MAGI if dependent is not required to file a return. But that is not the same thing as having a coverage exemption.

To argue otherwise means that a taxpayer could skip having coverage for ANY dependent children of any age, simply by not claiming an exemption. If this were true, wouldn't this fantastic news be well-known to all of us by now, and referenced in countless web links and articles?

[TaxGuyBill]

You are missing the phrase "properly claims". If the father doesn't "properly claim" the potential dependent, that dependent is not part of the "family".



(f)(1) Household income below filing threshold -(1)In general. An individual is an exempt individual for any taxable year for which the individual's household income is less than the applicable filing threshold.

(2)Applicable filing threshold -

(i)In general. For purposes of this section, applicable filing threshold means the amount of gross income that would trigger an individual's requirement to file a Federal income tax return under section 6012(a)(1).

(ii)Certain dependents. The applicable filing threshold for an individual who is properly claimed as a dependent by another taxpayer is equal to the other taxpayer's applicable filing threshold.



If the taxpayer does NOT "properly claim" the potential dependent, that means the "Applicable Filing Threshold" would be $6350 [(f)(2)(i)]. If the potential dependent's income is under that (such as all Qualifying Relatives), that person would be an "exempt" person.

I am confident that the actual Regulations would make that person an "exempt" person, and therefore not claiming the person would not incur the penalty. However, as I mentioned before, the prologue to the Regulations solidly indicated that is NOT what they meant to do, so I'm unsure what would happen if it went to Tax Court.

[New York Enrolled Agent]

You are missing the phrase "properly claims". If the father doesn't "properly claim" the potential dependent, that dependent is not part of the "family".



(f)(1) Household income below filing threshold -(1)In general. An individual is an exempt individual for any taxable year for which the individual's household income is less than the applicable filing threshold.

(2)Applicable filing threshold -

(i)In general. For purposes of this section, applicable filing threshold means the amount of gross income that would trigger an individual's requirement to file a Federal income tax return under section 6012(a)(1).

(ii)Certain dependents. The applicable filing threshold for an individual who is properly claimed as a dependent by another taxpayer is equal to the other taxpayer's applicable filing threshold.



If the taxpayer does NOT "properly claim" the potential dependent, that means the "Applicable Filing Threshold" would be $6350 [(f)(2)(i)]. If the potential dependent's income is under that (such as all Qualifying Relatives), that person would be an "exempt" person.

I am confident that the actual Regulations would make that person an "exempt" person, and therefore not claiming the person would not incur the penalty. However, as I mentioned before, the prologue to the Regulations solidly indicated that is NOT what they meant to do, so I'm unsure what would happen if it went to Tax Court.

TGB - Isn't the issue of properly claims part of a conditional sentence?

The first part says" If an individual may be claimed as a dependent by more than one taxpayer in the same calendar year , ...

I'm not sure that part is relevant to the original post. Perhaps I miss something.

[TaxGuyBill]

TGB - Isn't the issue of properly claims part of a conditional sentence?

The first part says" If an individual may be claimed as a dependent by more than one taxpayer in the same calendar year , ...

I'm not sure that part is relevant to the original post. Perhaps I miss something.

In §1.500aA-1(c)(2), yes. However, that paragraph is discussing a non-exempt individual. We need to find out if a person is a non-exempt individual or not, to determine if that paragraph applies.

In §1.5000A-3(f)(2)(ii) and §1.5000A-1(d)(4), the phrase "properly claims" is referring to §151, who ACTUALLY claims the dependent. So I was pointing out that is the potential dependent is not actually claimed, that person is "exempt" if their income is below the filing threshold ($6350 if their only income is earned income).


Again, I realize the Prologue to the release of the Regulations indicate that was not the intent, so I don't know what would happen if it was brought to Court.

[Rapid Robert]

You are missing the phrase "properly claims". If the father doesn't "properly claim" the potential dependent, that dependent is not part of the "family".
[...]
If the taxpayer does NOT "properly claim" the potential dependent, that means the "Applicable Filing Threshold" would be $6350 [(f)(2)(i)]. If the potential dependent's income

As NY EA stated, this is a side issue, as anyone who could be claimed, whether claimed or not, is part of the taxpayer's family for ACA SRP purposes. You are referring a separate rule about what the threshold is for a coverage exemption. We aren't really disputing the filing threshold here, it should be clear that the son in the OP is below the filing threshold based on gross income (not household income) and is not required to file a return. What we are disputing is whether he has a coverage exemption, and the only one in play here is "household income below filing threshold". But he has no "household income" because he cannot claim anyone (even himself) as a personal exemption deduction, therefore for ACA SRP purposes he has no household or family.

When you use the phrase "potential dependent's income", you are getting thrown off course. We don't care about that. We are concerned about "HOUSEHOLD income", which is a very specific phrase defined in this section of the code. Dependents (meaning anyone who could be claimed) don't have "household income" for purposes of ACA mandate. If they are not required to file a return, their AGI is not included in the household income calculation of the one who could claim them, but they are still part of the household (shared responsibility family) for ACA purposes.

[Rapid Robert]

" So I was pointing out that is the potential dependent is not actually claimed, that person is "exempt" if their income is below the filing threshold "

No, if their HOUSEHOLD income is below the filing threshold.

Agree with the following statement?

If I would otherwise owe a Shared Responsibility Payment for my 10-year old child who lives with me (dependent), but I simply don't claim the dependent exemption deduction for that child (who does not file his own return), then the SRP no longer applies with regard to my dependent child.

Yes or No?

[TaxGuyBill]

Household income ... dependent can't "properly claim" their own exemption ... okay, it may be sinking in now. :-)

I will need to re-look at things with a fresh mind at a later time, but yes, as of now I agree with you, and admit that I may be wrong.

If I'm wrong ... sorry for the confusion, and thank you for the correction. :-)

[taxitc]

I thought the original post was a QUITE SIMPLE post. I can't wait to see Trump's "post card" form. Do you think it will be in a yes-no format or a multiple choice format? With all the various answers to the (my) original question, I think I'll will put them in a hat and draw them out, or go with the best out of the first five draws. Thanks all.

[taxitc]

I thought the original post was a QUITE SIMPLE post. I can't wait to see Trump's "post card" form. Do you think it will be in a yes-no format or a multiple choice format? With all the various answers to the (my) original question, I think I'll will put them in a hat and draw them out, or go with the best out of the first five draws. Thanks all.

I figured the return both ways. To claim or Not to claim the son. To Claim - the father would owe $148.00 more in taxes. The SRP was $755.00. The exemption (4,050 X 15% = 607.50) is worth. Remember--The son doesn't live with the father. NO requirement to claim at all. What is wrong with this picture? $607.50 would by a lot of food. Also -Thanks for the help