By Kerri L. Tassin, J.D., CPA
Tax season 2015 brings with it some considerations resulting from recent additions to the Internal Revenue Code. New considerations include new forms, and changes to the Form 1040, created in response to the Affordable Care Act. While many taxpayers will simply check a box in response to the new requirements, others may need to make calculations and complete new tax forms.
The “Affordable Care Act” encompasses provisions from both the Patient Protection and Affordable Care Act (Public Law 111-148), as well as provisions from the Health Care and Education Reconciliation Act (Public Law 111-152). Both statutes were passed in 2010, but taxpayers will see changes to Form 1040, as well as new tax forms, incorporated into the 2014 tax return. These changes are in response to the creation of the Health Insurance Marketplace (“Marketplace”), and the requirement that nonexempt individuals maintain minimum essential health care coverage in compliance with Internal Revenue Code Section 5000A.
Taxpayers who maintained minimum essential coverage for themselves and their dependents throughout the entire year will check the box “Full-year coverage” on line 61 of Form 1040. Treasury Regulation Section 1.5000A-2 lists the types of coverage that qualify as minimum essential coverage. Minimum essential coverage may be obtained through certain government-sponsored programs, eligible employer-sponsored programs, individual market plans, and other health coverage plans.
Other taxpayers who purchased coverage through the Marketplace may qualify for a premium tax credit under Internal Revenue Code Section 36B. These taxpayers need to reconcile any advance credit payments received with the actual premium tax credit. Some taxpayers may have chosen to wait and claim any premium tax credit in its entirety on the tax return. Applicable taxpayers will calculate any premium tax credit and reconcile that calculation with any advance credit payments made to the taxpayer’s insurance company. The calculation and the reconciliation will be reported on Form 8962, Premium Tax Credit (PTC). In order to properly make the calculations related to the premium tax credit, taxpayers must use the information they will receive from the Marketplace on Form 1095-A, Health Insurance Marketplace Statement. Any excess advance premium tax credits received must be repaid, within certain limits for taxpayers whose household income is below 400 percent of the Federal Poverty Lines. Taxpayers who may have qualified for a higher premium tax credit may receive a refund.
Certain taxpayers may be exempt from the requirement to maintain minimum essential coverage. Taxpayers will use Form 8965, Health Coverage Exemptions, to indicate the appropriate exemptions. For example, taxpayers whose household income is less than their tax return filing threshold may claim an exemption. Other taxpayers may qualify for exemptions for unaffordable coverage, short coverage gaps, and certain hardships, to name a few. Some exemptions will be granted through the Marketplace, so taxpayers need to report the exemption certificate number for these exemptions on Form 8965.
IRC Section 5000A requires that taxpayers who did not maintain minimum essential coverage, and did not qualify for an exemption, calculate an individual shared responsibility payment. The penalty will be phased in over a three-year period, beginning with 2014. The penalty will increase for 2015, and again for 2016.
The material in this article is for informational purposes only and does not constitute written tax or legal advice. Please consult with your own tax adviser regarding your personal tax situation.
This article appeared in the April 18, 2015 issue of the Springfield News-Leader. It is available online here.
Kerri Tassin, J.D., CPA, teaches tax accounting classes in the School of Accountancy at Missouri State University. She also serves as director of the MSU Public Service Tax Clinics. Email: email@example.com.