January 07, 2015

The Tax Man Cometh - ACA & Tax Liability

The "individual mandate" to have health insurance was in effect in 2014. Unless exempted, individuals who did not have insurance for three months or more will have to pay a penalty of $95 per adult and $47.50 per child, or one percent of household income, whichever is greater, with a family cap of $285. These amounts are prorated depending on the period of uninsurance, and will go up in future years.

For information on how the ACA will affect personal taxes, see https://www.healthcare.gov/taxes/.  Below are "3 Tips About Marketplace Coverage & Your Taxes" from that site.  Additional information available on that web page includes  "No Health Coverage? What That Means for Your Taxes," as well as more detailed explanations about the "individual shared responsibility payment," who is exempt from the individual mandate, and the availability of Advance Premium Tax Credits to purchase insurance.

3 Tips About Marketplace Coverage & Your Taxes (from HealthCare.gov)

Your health coverage through the Health Insurance Marketplace may affect your taxes:

  • If anyone in your household enrolled in a health plan through the Marketplace in 2014, you'll need some new information when you file your federal income taxes.
  • If you didn't have health coverage for 3 or more months in 2014, you can apply for an exemption or you might have to pay a fee. Learn more at HealthCare.gov.

TIP #1: Watch your mail for Form 1095-A. It will help you file your 2014 federal taxes.

If you enrolled in a health plan through the Marketplace, you'll get Form 1095-A in the mail from the Marketplace by early February. Keep this form with your other important tax information, like your W-2 and other tax records. You won't get this form if you have health coverage through Medicaid, Medicare, or the Children's Health Insurance Program (CHIP).

Form 1095-A includes:

  • Information about anyone in your household who enrolled in a health plan through the Marketplace for 2014.
  • Information about the monthly premiums you paid to your health plan.
  • Information about a "benchmark" premium used to compute your premium tax credit.
  • The amount of any advance payments of the premium tax credit that were paid to your health plan on your behalf for 2014 - these payments might have helped you lower what you paid for your monthly premiums.

You may get more than one Form 1095-A if anyone in your household switched plans in 2014 or reported life changes (like getting married or having a baby) after your coverage began. It also might happen if you had more than one policy covering people in your household during 2014. You'll get a Form 1095-A even if you only had Marketplace coverage for part of 2014.

When you get the Form 1095-A in the mail from the Marketplace, make sure the information matches your records. Check things like the start and end dates of your coverage and the number of people in your household. If you think information on your Form 1095-A is incorrect, visit HealthCare.gov/taxes/ to find out how to get a corrected Form 1095-A.

You also can download and print a copy of your Form 1095-A from your Marketplace account on HealthCare.gov. Click on "Log In" at the top of the home page to access your Marketplace account.

TIP #2: Your final premium tax credit for 2014 will be computed with your federal income tax return.

When you applied for health coverage through the Marketplace, you provided information on your application about your income and family size. The Marketplace used this and other information to determine the amount of premium tax credit you were eligible to get. If you were like most people who qualified, you probably used "advance payments" of this premium tax credit at the time you enrolled in a health plan, to lower what you paid for monthly premiums. If so, the final or actual amount of your premium tax credit will be computed when you file your federal income tax return. Your tax software or preparer will figure out this amount, or you'll complete and attach the Premium Tax Credit Form (Form 8962) to your tax return when you file.

If the amount you used during the year is less than the actual premium tax credit you're eligible for, you'll get the difference as a credit on your tax return. If the advance payments you used are more than the actual amount of your credit, you may need to pay the difference with your tax return. If you didn't get any help to lower the amount you paid for your health plan premiums during 2014, you might still qualify for a premium tax credit when you file your taxes. Use Form 8962 from the IRS to find out if you qualify for a premium tax credit and compute the amount to report on your tax return.

TIP #3: If you didn't have health coverage for part of 2014, use Form 8965.

If your Marketplace coverage started partway through 2014 and you were uninsured earlier in the year, you'll need to fill out Form 8965 from the IRS when you file your taxes. This will show you if you qualify for an exemption from paying a fee for the months you didn't have coverage.

Help is available.

  • For more information about how your Marketplace coverage will affect your taxes, visit HealthCare.gov/taxes/ or call the Marketplace Call Center at 1-800-318-2596. TTY users should call 1-855-889-4325.
  • Many people who signed up for Marketplace coverage can get free assistance with filling out their taxes. This may include free access to tax software programs, or free in-person assistance. For more information, visit IRS.gov/freefile or IRS.gov/VITA.
  • If you have questions about your taxes, need Form 8962 or Form 8965, or want to learn more about the fee for not having health coverage, visit IRS.gov.