According to the American Institute of CPA’s, taxpayers will find new reporting requirements when they file their 2014 returns. As a result of the Affordable Care Act, otherwise known as Obama Care, taxpayers will have to collect new records and learn to use new forms and instructions. In some cases, your tax refund may be affected.
As far as the Affordable Care Act goes, taxpayers fall into three distinct groups:
1. They have health insurance that provides minimal essential coverage, either through employer-sponsored plans or the Health Insurance Marketplace.
2. They qualify for an exemption.
3. They owe a penalty for not having qualified health insurance.
The change will be fairly simple for the majority of people who get their insurance through their jobs. If that includes you, then you will just check a box on your tax form. However, if you bought insurance through a state or federal exchange or did not have health insurance in 2014, the situation is more complicated.
Unless you were exempt, you would report on your 2014 federal tax return whether you had health insurance for each month of 2014. If you purchased health insurance from the Marketplace for 2014 you received Form 1095-A, verifying that you had minimum essential coverage. Employer-provided health insurance plans that met the standards did not have to provide the information for the 2014 tax year.
You may qualify for an exemption from minimum essential coverage. Financial hardship and membership in certain religious groups are among the types of exemptions available. The are two ways to claim the exemption: through the Marketplace or by claiming the exemption on your tax return using Form 8965. The IRS website has a chart explaining how each exemption can be obtained.
If you don't have health insurance, you owe penalties for each month in 2014 that you did not have qualifying coverage. The instructions for Form 8965 include a worksheet that taxpayers – who did not have minimum essential coverage or who did not qualify for an exemption – use to calculate the amount they owe.
Premium tax credits or health care subsidies are based on income. If you had health insurance in 2014 through the Health Insurance Marketplace, you might be eligible for the premium tax credit. If so, it helps lower the cost of your coverage. If you underestimated your 2014 income and received a larger subsidy than you were eligible for, you will have to pay it back.
Many taxpayers find that the new health insurance reporting requirements are complicated and challenging. Washington DC tax preparation firm, Charles P Myrick CPA can assist you in making sense of the new requirements. Contact us today.