IRS Notice CP21H – Changes to Your Shared Responsibility Payment (SRP). The IRS sends Notice CP21H to inform you that the IRS made changes to your tax return. These changes resulted in an adjustment to the Shared Responsibility Payment (SRP). This notice falls under the category of “Return Accuracy”.

REASONS WHY YOU RECEIVED IRS NOTICE CP21H

There are some reasons why you may receive IRS Notice CP21H, they are:

  • After you filed your tax return you discovered an error.
  • The IRS made a Shared Responsibility Payment (SRP) adjustment to your return.
  • The IRS sent Notice CP21H to notify you of the adjustment and whether the adjustment resulted in a balance due or a refund. If you are due a refund, you should receive it in four to six weeks.

SHARED RESPONSIBILITY PAYMENT

The federal health care law known as the Affordable Care Act requires all Americans to have health insurance. For tax years before 2019, if you don’t have health insurance, you must get an exemption from the requirement to buy coverage, or wind up paying a tax penalty. The law says citizens, employers and government share the responsibility of keeping everyone covered, so the penalty for going without insurance has been dubbed the “shared responsibility payment.”

Insurance requirements – Under the Affordable Care Act (ACA), you and your dependents must be covered by a health insurance policy that provides “minimum essential coverage”. Health insurance you get from an employer provides this level of coverage, as do government health insurance programs such as Medicaid and Medicare. Any policy you buy through the online marketplaces set up under the ACA also gets you minimum essential coverage. A health insurance provider can tell you whether a policy offers minimum essential coverage.

MINIMUM ESSENTIAL COVERAGE

The ACA requires that you carry health insurance that provides “minimum essential coverage.” This means that you have one of the following types of policies:

  • Children’s health insurance program (CHIP)
  • COBRA coverage
  • Department of Defense Non-appropriated Fund Health Benefits Program
  • Group health insurance coverage through your employer
  • Health care coverage provided to the Peace Corps volunteers
  • Health care coverage through the Department of Veterans Affairs
  • Insurance purchased individually
  • Insurance through a student health plan at college or university
  • Medicaid plans (except limited-coverage plans)
  • Medicare Advantage plans
  • Medicare Part A
  • Refugee Medical Assistance
  • Retiree coverage through your former employer
  • State high-risk health insurance pools
  • TRICARE plans (except limited-coverage plans)

The shared responsibility payment does not apply to you if you have one of these types of health insurance—at least if you had it all year. Otherwise, the shared responsibility payment must be calculated in two ways. You’re responsible for paying whichever calculation amounts to more.

AVAILABLE EXEMPTIONS

The ACA provides several exceptions to the coverage requirement. Through 2018, if you have an exemption, you don’t have to pay the shared responsibility penalty even if you don’t buy health insurance.

From the beginning of 2019, there was no longer a penalty for not having health insurance. We would look at some exemptions. If any of these apply to you, you may be exempt:

  • Your income is so low that you aren’t required to file a tax return. For example, single taxpayers in 2018 don’t have to file if their income is $12,000 or less; for married couples, it’s $24,000. This amount can change each year.
  • You can’t find affordable insurance. The law defines affordable as a policy that costs no more than 8 percent of your income.
  • You have a gap in coverage for less than three months.
  • You’re a member of an Indian tribe recognized by the federal government.
  • You take part in a health care sharing ministry. This is a religious-based group whose members pledge to pay one another’s medical bills.
  • You belong to a recognized religious group with faith-based objections to all forms of health insurance.
  • You are an inmate or are in the country illegally.
  • You apply for and receive a hardship exemption, such as for homelessness, bankruptcy or natural disaster.

MAKING THE PAYMENT

If you’re required to make a shared responsibility payment, the amount you’ll pay depends on several factors:

  • How many people in your household went uninsured during the year
  • Whether the uninsured people were adults or children
  • How long they were uninsured.
  • Your household income

You start by calculating your “full” shared responsibility payment — how much you’d owe if you were uninsured all year. You then adjust that full payment according to how long you were without insurance. For example, if your full shared responsibility payment was $480 and you were uninsured for half the year, you would pay half of that $480, or $240. In most cases, you’ll calculate and make your shared responsibility payment when you file your income tax return.

CALCULATING THE PAYMENT

The shared responsibility payment is being implemented gradually over a number of years:

  • For 2014, the full payment was $95 for each adult, $47.50 for each child, up to a maximum of $285 — or 1% of your household income, whichever was higher
  • For 2015, the full payment was $325 for each adult, $162.50 for each child, up to a maximum of $975 — or 2% of your household income, whichever was higher
  • For 2016 and 2017, the full payment was $695 per person, $347.50 for each child, up to a maximum of $2,085 — or 2.5% of your household income, whichever was higher

From 2016 through 2018, the household income percentage remained at 2.5%; the per-person amounts and the household maximum rose with inflation. After 2018, there is no longer a penalty for not having health insurance.

In the past, when taxpayers don’t make the payment, The Internal Revenue Service will send you a series of notices requesting payment if you don’t remit any balance due by April 15. Interest will accrue on unpaid shared responsibility payments from the due date of the payment. But here’s a bit of good news. The IRS is not permitted to assess late payment penalties, to issue a federal tax lien, or to levy your wages or bank account for any unpaid shared responsibility payments.

NOTICE DEADLINE – There is no deadline given for this notice.