Individual Shared Responsibility Penalty Calculation March 2020 Tax News
California’s new Minimum Essential Coverage Individual Mandate (Ch. 38, Stats. 2019), otherwise known as the individual health care mandate, requires Californians to have health insurance coverage effective January 1, 2020.
Under the new law, California residents who do not have coverage for themselves and their dependents in 2020, and who do not otherwise qualify for an exemption, will pay an Individual Shared Responsibility Penalty when they file their 2020 California income tax returns in 2021. The penalty is based on several factors, including an individual’s age and the household’s gross income and is calculated monthly. The penalty applies to each individual who does not have coverage or an exemption.
To assist taxpayers and tax professionals in determining the potential amount of the penalty for the 2020 taxable year, we recently issued FTB Notice 2020-01. For purposes of calculating the penalty, the Notice clarifies the monthly state average bronze plan premium amount per individual and per household size of five or more nonexempt individuals. This Notice provides that for purposes of the penalty, households with five or more members would use the monthly state average bronze plan premium amount based on a household of five.Refer to FTB’s Health Care Mandate webpage or Covered California, the official site of California’s health insurance marketplace for additional information regarding the new law and obtaining coverage.