Historical Tax Notes

This document lists some of the important tax changes that occurred over the previous years. Many of these changes are no longer law.

Major Tax Acts

Covid-19 Distributions

Section 2202 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act treats Covid-19 as a qualified natural disaster, so it provides that the 10% early withdrawal penalty does not apply to a distribution of up to $100,000 made during 2020 to a qualified individual because of Covid-19. A qualified individual is an individual, spouse, or dependent diagnosed with Covid-19 or who has suffered financially, because of reduced or eliminated work hours or because childcare is unavailable, due to Covid-19.

These Covid-19 distributions may be recontributed to the tax-advantaged retirement plan during the 3-year period starting the day after the withdrawal. Recontributed amounts are treated as if the plan beneficiary received an eligible rollover contribution and, within 60 days, transferred the amount to a qualified retirement plan as a direct trustee-to-trustee transfer. Any distribution not recontributed is included as taxable income, but ratably over the 3-year period after the withdrawal or the taxpayer can elect to pay tax on the entire distribution by the filing date for tax year 2020.

This page lists the major changes in tax law, starting in 2020.

Taxpayer Certainty and Disaster Tax Relief Act of 2019

Source: Taxpayer Certainty and Disaster Tax Relief Act of 2019

This Act is divided into these sections:

Here are some of the highlights of this Act that applies to most individuals.

Tax Relief and Support for Families and Individuals

Incentives for Energy Production, Efficiency, and Green Economy Jobs

Extending Certain Provisions Expiring in 2019

Reduces the Unified Tax Credit

Provides Disaster Tax Relief

Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019

Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 (SECURE Act) was signed into law on December 20, 2019, with most provisions taking effectJanuary 1, 2020. Most provisions improve the usefulness of retirement accounts for participants and increases the flexibility and reduces the costs of setting up retirement, accounts by employers. It also reduces liability for employers, especially for those who provide a lifetime income product, such as an annuity or other insurance product.

For taxpayers:

For employers:

Premium Tax Credit

2019

Individual Shared Responsibility Payment

The Tax Cuts and Jobs Act eliminated the individual mandate and its penalty.

The tax penalty, the individual shared responsibility payment, may apply if the taxpayer did not have the minimum essential coverage for at least 9 consecutive months. One characteristic of minimum essential coverage is that deductibles and co-pays cannot exceed certain amounts. If the taxpayer received minimum essential coverage, which can include employer-provided insurance, COBRA, Medicare, or Medicaid, then the individual mandate is satisfied. The taxpayer only needs to check a box on the tax form to indicate that he was covered.

Insurers of individually purchased plans will send Form 1099s to the IRS for those who had coverage; the value of employer-provided insurance will be in reported on Form W-2, Wage and Tax Statement.

The tax penalty for 2015 is the greater of $325 per adult and $162.50 per child under age 18, with a family maximum of $975, or 2% of MAGI income exceeding the filing thresholds ($10,300 for single individuals and $20,600 for married couples under 65). In 2016, the penalty is the greater of 2.5% of household income, up to the average total annual premium for a Bronze plan sold through the Marketplace, or $695 per adult and $347.50 per child under 18, with a maximum penalty of $2,085. However, in calculating the percentage penalty, the filing threshold for the taxpayer is deducted from MAGI, then multiplied by the penalty percentage, up to the maximum. So, if a taxpayer claims head of household and earns $78,000 in 2018, then the filing threshold is $18,000, yielding a base income subject to the penalty of $60,000 (= $78,000 − $18,000), resulting in a penalty of $60,000 × 2.5% = $1500.

The penalty is capped at the national average premium of the bronze level health plan, which, in 2014, was $2448 per individual and $12,240 per family. After 2016, the tax penalty will be adjusted for inflation.

The penalties are calculated monthly, so 1/12 of the penalty is applied for each month without coverage. However, the taxpayer can go 3 months without coverage before the penalty kicks in.

If the tax penalty is not paid, then the IRS can only collect the unpaid penalty from future refunds — it cannot be collected by levy, such as garnishment, or lien. Moreover, no interest or additional penalties can be assessed on the original penalty. The statute of limitations that applies to the IRS for collecting payments is 10 years, so the IRS is permitted to deduct a penalty from any refund over the next 10 years, adding interest to the total until the penalty is paid.

Exemptions

Some people can receive an exemption from the individual mandate. Some exemptions can be claimed on the tax return, and some must be claimed from the Health Insurance Marketplace. Some can be claimed on either form. If the exemption must be claimed from the health exchange, then a signed application must be sent to the exchange, which is processed manually, possibly taking several weeks.

If the exemption is approved, the taxpayer will receive an exemption certificate number, which must be entered on the tax return. If the application for an exemption is denied, then the taxpayer can appeal. A taxpayer can apply for a retroactive exemption after December 31, but the process will take longer.

Qualified reasons for granting an exemption include:

People with religious objections to health insurance and members of federally recognized Native American tribes can also get an exemption. The full list can be found that HealthCare.gov.

Form 8965

An exemption must be claimed on Form 8965, Reporting of Exemptions from Coverage to report that the taxpayer has a qualified exemption from buying health insurance. The exemption certificate number must be reported when filing the tax return to avoid the tax penalty from not having insurance.

2021 and 2022

For 2021 and 2022 only, the American Rescue Plan Act (ARPA), signed into law in March 2021, changes the premium tax credit (PTC) by raising the income phaseout and improving the credit formula to make health insurance more affordable for lower income taxpayers.

Moreover, a new special enrollment period is now available until August 15 on the federal marketplace, which will allow taxpayers to enroll or change plans for 2021.

Applicable percentages determine how much individuals pay for health insurance premiums for coverage purchased through the Health Insurance Marketplace. The ARPA decreases applicable percentages and allows a PTC for household incomes over 400%.

Household incomes as a % of FPL and the applicable %:

Updated Guidance from the IRS: RRP-2021-23