​Taxes and the Affordable Care Act

Beginning in 2014, the “individual mandate” under the Affordable Care Act (ACA) begins. Not only are all individuals required to have insurance, but all people who are required to file a tax return must report their insurance on that return. Additional information will be required to prepare your 2014 return. Here are the ACA basics.

In reporting their insurance, people will fall into one of four categories:

  • You purchased qualifying insurance through the exchange (the Marketplace);
  • You received qualifying insurance through some other source such as an employer or Medicare;
  • You did not purchase or receive qualifying insurance, and you do not have an exemption which means you will be subject to the penalty for not having insurance;
  • You did not purchase or receive qualifying insurance but you are entitled to an exemption from the penalty.

To complicate matters, the above four categories apply to each member of your family and may apply differently to each member (for example, different members of the family have insurance from different sources). Moreover, any one member of your family may have changed categories during the year. The information we request below must cover each family member on a month-to-month basis. If a family member’s situation was the same for the entire year, then you can document that member’s insurance on a yearly basis.

Exchange:  If you purchased insurance through the exchange you should receive a Form 1095-A Health Insurance Marketplace Statement. This form will be used to claim any Premium Tax Credit to which you may be entitled. Note that you cannot receive this tax credit without this form.

Other source: If you purchased or received insurance from another source you will need to provide documentation. If it is government insurance, such as Medicare, the government will send you the documentation. If it is employer insurance, the employer may provide you with Form 1095-B or Form 1095-C. If they do not provide either form, a copy of the insurance policy is acceptable. If you cannot provide any documentation, but you are sure you had qualifying coverage, a signed statement will be required.

Exemption: Some exemptions are claimed on the tax return and others require a certificate from the exchange. An exemption cannot be claimed without the certificate. Examples of exemptions that require certification from the exchange include:

  • Members of certain religious sects;
  • You did not have access to affordable coverage at the beginning of the year due to your household income;
  • You were notified that your health insurance plan would not be renewed and other plans were not affordable; or
  • You experienced other problems that prevented you from getting insurance. This broad category includes homelessness, evictions or foreclosures, domestic violence, bankruptcy, illness or death in the family, and many other hardships.

A full list of exemptions can be found at: www.healthcare.gov/fees-exemptions/hardship-exemptions.  If you think you qualify for an exchange exemption, visit http://marketplace.cms.gov to learn more and to get an application for exemption. The exemptionapplication can be found at: http//marketplace.cms.gov/applications-and-forms/hardship-exemption.pdf.  We suggest you file the application as soon as possible, as it can take at least two weeks to obtain and will delay filing your return.

Preparing your tax return this year will include an entirely new and complex process. Make sure that your tax professional is prepared to comply with these new governmental requirements.  At Quantax, our tax professionals have the education and experience to accurately prepare your return.  Now is the time to start preparing the information you will need come tax time.  Please let us know if you have additional ACA questions or concerns, or if we can help you with your return. (Contact Us)