We might meet several tax problems during our life, and one of the most common types of tax problem could be the individual mandate penalty.

The background of individual mandate penalty originates from The Affordable Care Act (commonly knowns as “Obamacare”), which requires all U.S. citizens and legal residents to have health insurance that meets the law’s requirements, or else they have to pay a tax penalty. This requirement is also known as the individual mandate. Under the individual mandate provision (which is the requirement for the health care, sometimes called a “shared responsibility requirement” or mandatory minimum coverage requirement), if we do not buy an acceptable heath care that meets the health insurance policy, we will be charged an annual tax penalty of $95, or up to 1% of income over filing minimum. If we do not cover this fee, our tax record will be assessed the penalty on during the Federal tax return. In the wording of the law, a taxpayer who fails to pay the penalty “shall not be subject to any criminal prosecution or penalty” and cannot have liens or levies placed on their property, but the IRS will be able to withhold future tax refunds from them. In other words, if we do not meet the requirement, our tax refunds will be withheld by the IRS.

Although President Trump campaigned on a promise to repeal the ACA and replace it with something else, some states still have the individual mandate penalty. Besides, Republicans in the House passed the American Health Care Act in 2017 but the legislation failed in the Senate, despite repeated attempts by GOP Senators to pass it, which means this penalty still works until today. States such as Massachusetts, Rhode Island, and New Jersey still apply this penalty until 2020. Thus, it’s necessary and important to do some research about your state policy towards Individual Mandate Penalty in order to avoid the tax return withholding. 

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