The Health Care Law – Preparing to File Your 2014 Tax Return

January 22nd, 2015

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice. 

Beginning in tax year 2014 there is a new reporting and certification requirement that is required to be reported when you file your Federal tax return.  This new requirement is associated with the provisions of the  “Affordable Care Act (ACA)”.  In a nutshell, all individual taxpayers must now have health care insurance coverage.  If you did not have health care coverage in the prior calendar year you will need to complete Federal Form 8965, “Health Coverage Exemptions” (http://www.irs.gov/pub/irs-pdf/f8965.pdf ).  The instructions for completing the form are provided at the IRS website (http://www.irs.gov/pub/irs-pdf/i8965.pdf ) .  This is a standard tax form and should be included with your off-the-shelf tax return preparation software.

To summarize, all individuals (includes your family) can be grouped in to one of three categories for determining your reporting requirements:

1.    You had health care insurance coverage (also referred to as “minimum essential coverage”) throughout the entire tax year, or

2.     You have a health care coverage EXEMPTION, or

3.    You do NOT meet the requires for either #1 or #2 above and must make a “shared responsibility” payment with your tax return.

Health care coverage exemptions are usually provided  (granted) from the Marketplace (also referred to as health care exchanges).   You may also complete Form 8965 to claim this exemption.  Use this same form if for any month in the tax year either you or any member of your family (“tax household”) had neither “minimum essential coverage” or a health care coverage exemption.  From the “General Instructions” for Form 8965:

“Some coverage exemptions are available only from the Marketplace, others are available only by claiming them on your tax return, and others are available from the Marketplace or by claiming them on your tax return. If you or another member of your tax household was granted a coverage exemption from the Marketplace, complete Part I of Form 8965.  If you or another member of your tax household is claiming a coverage exemption on your tax return, complete Part II or Part III of Form 8965.   Depending on your situation, you may need to complete one or more parts of the form.

These instructions also provide the information you will need to calculate your shared responsibility payment if, for any month, you or another member of your tax household did not have qualifying health care coverage (referred to as “minimum essential coverage”) or a coverage exemption. Use the Shared Responsibility Payment Worksheet, later, to figure your payment, if any.   You will report any payment amount on your tax return (Form 1040, line 61; Form 1040A, line 38; or Form 1040EZ, line 11).”  

The Health Care Law – Getting Ready to File Your 2014 Tax Return

 

It’s always a good idea to prepare early to file your federal income tax return.  Certain provisions of the Affordable Care Act – also known as the Health Care Law – will probably affect your federal income tax return when you file this year.

You or your tax professional should consider preparing and filing your tax return electronically.  Using tax preparation software is the easiest way to file a complete and accurate tax return. There are a variety of electronic filing options, including free volunteer assistance, IRS Free File for taxpayers who qualify, commercial software, and professional assistance.

Here are five things you should know about the health care law that will help you get ready to file your tax return.

Coverage requirements

The Affordable Care Act requires that you and each member of your family have qualifying health insurance coverage for each month of the year, qualify for an exemption from the coverage requirement, or make an individual shared responsibility payment when filing your federal income tax return.

Reporting requirements

Most taxpayers will simply check a box on their tax return to indicate that each member of their family had qualifying health coverage for the whole year. No further action is required. Qualifying health insurance coverage includes coverage under most, but not all, types of health care coverage plans. Use the chart on IRS.gov/aca to find out if your insurance counts as qualifying coverage. 

For a limited group of taxpayers -those who qualify for, or received advance payments of the premium tax credit – the health care law could affect the amount of tax refund or the amount of money they may owe when they file in 2015. Visit IRS.gov/aca to learn more about the premium tax credit.

Exemptions

You may be eligible to claim an exemption from the requirement to have coverage.  If you qualify for an exemption, you will need to complete the new IRS Form 8965, Health Coverage Exemptions, when you file your tax return.   You must apply for some exemptions through the Health Care Insurance Marketplace.  However, most of the exemptions are easily obtained from the IRS when you file your tax return. Some of the exemptions are available from either the Marketplace or the IRS.

If you receive an exemption through the Marketplace, you’ll receive an Exemption Certificate Number to include when you file your taxes. If you have applied for an exemption through the Marketplace and are still waiting for a response, you can put “pending” on your tax return where you would normally put your Exemption Certificate Number.

Individual Shared Responsibility Payment

If you do not have qualifying coverage or an exemption for each month of the year, you will need to make an individual shared responsibility payment when you file your return for choosing not to purchase coverage. Examples and information about figuring the payment are available on the IRS Calculating the Payment page.

Premium Tax Credits

If you bought coverage through the Health Insurance Marketplace, you should receive Form 1095-A, Health Insurance Marketplace Statement from your Marketplace by early February. Save this form because it has important information needed to complete your tax return. 

If you are expecting to receive Form 1095-A and you do not receive it by early February, contact the Marketplace where you purchased coverage.  Do not contact the IRS because IRS telephone assistors will not have access to this information.

If you benefited from advance payments of the premium tax credit, you must file a federal income tax return. You will need to reconcile those advance payments with the amount of premium tax credit you’re entitled to based on your actual income. As a result, some people may see a smaller or larger tax refund or tax liability than they were expecting.  When you file your return, you will use IRS Form 8962,Premium Tax Credit (PTC), to calculate your premium tax credit and reconcile the credit with any advance payments.

For more information about the Affordable Care Act and your 2014 income tax return, visit IRS.gov/aca.

 

 

 

Posted by Bill Seabrooke