by | FREEDOM, GOVERNMENT, OBAMA, OBAMACARE, POLITICS, TAX TIPS, TAXES
If you are one of the millions of Americans who declined health insurance and decided to pay the fee tax fine penalty, be aware that it will be a part of your 2014 tax calculations. The penalty for 2014 is relatively cheap, a means to transition Obamacare into your life, but next year and subsequent years, the penalty goes up swiftly — pressuring you to get a health insurance plan or else pay a somewhat hefty price.
Here’s how it works:
“Beginning in 2014, absent a qualified exemption, you will be required to obtain health insurance. If you fail to comply, you will be subject to a penalty of 1.0% of your annual income or $95.00, whichever is greater. In 2015, the penalty increases to the greater of 2.0% of annual income or $325 per person. The following year it becomes the greater of 2.5% of income or $695 per person. After 2016, it will be indexed to the cost of living. It should also be noted that the maximum penalty is capped at three times the per person penalty. For example, if you earn $28,500 in 2014, 1.0% of your income would equal $285. Therefore, if you earn more than this, your maximum penalty would remain the same. All penalties will be due and payable with your annual federal income tax return. Hence, the penalty for 2014 would be due by April 15, 2015 and the IRS will be the collection agency used.”
The method of assessing and collection the fee is through the Internal Revenue Service (IRS). The fee will be collected by deducting its cost from a person’s tax refund. But for those who don’t get a refund, the IRS isn’t allowed to demand payment either, so it is unclear how those fees will be attained. This ambiguity also leads to further questions about how Obamacare is being actually being paid for (as the penalty is one of the revenues to help offset the costs).
“For Americans unsure how the mandate applies to them, there’s plenty of information available from the government itself and from many third-party web sites. The law was designed to make it cheaper for most people to buy insurance than pay the penalty fee, which rises from $95 per person or 1% of your income (whichever is greater) in 2014, to $325 per person or 2% of your income in 2015. (In 2015, the maximum penalty is the national average premium for a bronze plan.)”
Don’t forget too: if you are an Obamacare user, you will have to file an extra form with your taxes, the 1095A. The IRS has a working draft on the form, but doesn’t yet include the instructions on how to calculate the proper subsidy amount. This could potentially cause issues for those who wish to file their taxes right away, because they will have to wait until they receive their form in the mail from the government. To learn more, read here.
by | ARTICLES, ECONOMY, FREEDOM, GOVERNMENT, HYPOCRISY, OBAMA, POLITICS, TAXES
Just like the recent rise of business inversions — moving business HQ abroad — the United States has seen an uptick (up 221%) in Americans renouncing their citizenship. The elephant in the room in both these cases is taxes: both high taxes and burdensome tax compliance in foreign jurisdictions.
Instead of facing the problems directly, the Obama Administration has resorted to punitive measures. The shame and blame tactic of calling out businesses who wish to relocate as “unpatriotic” was undignified. Perhaps realizing that using the same strategy with individuals would be even less well received, they went the more quiet, direct route: yesterday, the State Department announced their interim final rule that raises the fee for renouncing citizenship from $450 to $2,350.
Their justification for raising the fee is the time and labor involved in the process; that is, the bureaucratic red tape that they created, and then decide to charge exhorbitant fees for:
“The CoSM demonstrated that documenting a U.S. citizen’s renunciation of citizenship is extremely costly, requiring American consular officers overseas to spend substantial amounts of time to accept, process, and adjudicate cases. For example, consular officers must confirm that the potential renunciant fully understands the consequences of renunciation, including losing the right to reside in the United States without documentation as an alien. Other steps include verifying that the renunciant is a U.S. citizen, conducting a minimum of two intensive interviews with the potential renunciant, and reviewing at least three consular systems before administering the oath of renunciation. The final approval of the loss of nationality must be done by law within the Directorate of Overseas Citizens Services in Washington, DC, after which the case is returned to the consular officer overseas for final delivery of the Certificate of Loss of Nationality to the renunciant. These steps further add to the time and labor that must be involved in the process. Accordingly, the Department is increasing the fee for processing such requests from $450 to $2,350. As noted in the interim final rule dated June 28, 2010 (77 FR 36522), the fee of $450 was set substantially below the cost to the U.S. government of providing this service (less than one quarter of the cost). Since that time, demand for the service has increased dramatically, consuming far more consular officer time and resources, as reflected in the 2012 Overseas Time Survey and increased workload data. Because the Department believes there is no public benefit or other reason for setting this fee below cost, the Department is increasing this fee to reflect the full cost of providing the service. Therefore the increased fee reflects both the increased cost of the provision of service as well as the determination to now charge the full cost.
Interestingly enough, if you compare the cost of renunciation in the United States to the cost of renunciation in other countries, the new fee puts the United States way above others. You can check out this handy chart here. The next two highest are Jamaica ($1,010 in US dollars), and Sierre Leone ($663 in US dollars).
So those who wish to renounce their citizenship get to buy their freedom by paying a 422% fee increase for the express privilege of dealing with United States bureaucracy one final time.
This is considered an administrative fee, issued by the State Department, but it is essentially an unofficial “exit tax” for regular citizens. But there is a real one too. As Forbes notes, “To leave America, you generally must prove 5 years of U.S. tax compliance. If you have a net worth greater than $2 million or average annual net income tax for the 5 previous years of $157,000 or more for 2014 (that’s tax, not income), you pay an exit tax”.
So for those who have done well in the United States, besides the higher administrative fee/exit tax, you get to pay that real “exit tax” knows as the 877A.
Alas, this isn’t the first time those wishing to leave have been targeted. A bigger, punitive measure was attempted in 2012 by Senators Chuck Schumer and Bob Casey. When the co-founder of Facebook, Eduardo Saverin, renounced his U.S. citizenship as a means to save millions in taxes before Facebook went public, the Senators reacted by proposing the “Ex-PATRIOT Act” of 2012 that essentially doubled the exit tax for high worth individuals. “People who could not prove another reason for renouncing citizenship would face a 30% tax on future capital gains on U.S. investments – twice the current 15% rate – and be barred from receiving a visa to enter the country.” Thankfully the bill died in committee the first year, and did not advance out of the Senate in 2013.
Though this new fee hike is different than the standard exit tax, and on a much smaller scale (dollars-wise), it speaks the same language: punish. All this fee hike does is prove that that current administration would rather squeeze U.S. citizens for more revenue, thus likely reiterating to those renouncing their citizenship that being a U.S. citizen lacks much of the value that it once did. And that is a very sad thing.
