Please note that the question and answer provided does not take into account all options or circumstances possible.
May 26, 2016
Question: Justin had three different employers during the tax year. He had minimum essential coverage (MEC) from the beginning of the year through March 5, 2015 when he left his job. He secured another job right away but, his MEC was not effective until May 15, 2015. He worked there for a while, but was let go July 10, 2015, at which time his MEC terminated. Eventually, he found his current job and had MEC from October 1, 2015 through the end of the year. For the purposes of the individual shared responsibility penalty, which months is Justin subject to the penalty and how many months, if any, can he use the short-term (less than three months) gap exemption?
Answer: Without any exemption, Justin owes the penalty for three months: April, August and September. In this fact set, Justin can only use the short-term gap exemption for one month: April. Justin must pay the individual shared responsibility penalty for August and September on his 2015 tax return.
For the penalty, any month that Justin has coverage for at least one day of that month, he is considered to have MEC and is not subject to the penalty for that month. Therefore, between his first and second job, he is without MEC for only one month (April), despite the fact that his first gap (3/5/15 – 5/15/15) actually spanned two months and ten days on the calendar. For the next gap, August and September are the only two months Justin is without at least one day of MEC.
Each gap is less than three months; however, Justin is only able to use the short-term gap exemption for one gap per tax year. Furthermore, Justin is not able to choose which gap to utilize the exemption. Rather, the short-term gap exemption can only be used for the first gap, regardless of the fact that using the exemption for the second gap would have provided more relief from the penalty.