Insurance Is Boring

 

Six Million To Pay ACA Penalty in 2014

 

As many as 6 million taxpayers will have to pay a penalty of as much as 1 percent of income because they went without health insurance in part or all of 2014, the Treasury Department said.

 

The penalty, part of the Affordable Care Act, is designed to encourage people to sign up for health insurance under the law. The penalty would apply to about 2 percent to 4 percent of all taxpayers for 2014.

 

Tax filing for 2014 opened Jan. 20, and the Internal Revenue Service's Form 1040 -- for federal income tax -- includes a new Line 61 asking if the taxpayer has health insurance. Three-quarters of taxpayers won't have to do anything more than check that box. The remainder will have to take additional steps, though most won't pay a penalty in 2014 according to the IRS.

 

The IRS has been preparing for additional strain during the tax season as people adjust to the rule, warning that about half the people who call its toll-free phone lines won't be able to get through.

 

About 3 percent to 5 percent of taxpayers got tax credits last year to help them pay the cost of higher premiums on insurance plans. Ten percent to 20 percent weren't insured for all or part of the year but will be able to claim an exemption. People who owe a penalty will pay a fee because they chose not to obtain health insurance, and they're not eligible for one of the exemptions.

 

About 8 million people purchased health care policies through the insurance exchanges in 2014. However, a large number did not maintain coverage for the full 12 months and may still owe a penalty. The United States gets about 150 million income tax returns a year.

 

The Health Care Law's Effect on Your Tax Return

 

The Affordable Care Act contains tax provisions that affect the 2014 income tax return. Almost everyone is affected by the individual shared responsibility provision while only people who purchased coverage through the Marketplace (HHS.gov) are affected by the premium tax credit. The following chart will help you better understand what you need to do on your tax return.

IF YOU...

THEN YOU...

And everyone in your tax household had health coverage for the entire year

Will simply check the box on line 61 of Form 1040,  line 38 of Form 1040-A, or line 11 of Form 1040-EZ

Enrolled in health insurance through the Marketplace

Should receive a Form 1095-A Health Insurance Marketplace Statement from the Marketplace

Received a Form 1095-A, Health Insurance Marketplace Statement, showing you received the benefit of advance payments of the premium tax credit in 2014

Must file a tax return in 2015 and reconcile the advance payments with the amount of the premium tax credit allowed on your return 

Need to reconcile the advance payments of the credit with the credit allowed

Make the calculations using IRS Form 8962 Premium Tax Credit (PTC)

Must repay any excess advance payments of the premium tax credit

Must report the information on line 46 Form 1040 or line 29 of Form1040-A, and cannot file Form 1040-EZ

Are claiming the premium tax credit and did not benefit from advance payments of the premium tax credit

Must file a tax return and IRS Form 8962, Premium Tax Credit (PTC)

Did not receive a Form 1095-A, Healthcare Insurance Marketplace Statement,from the Marketplace

Should contact the state or federal Marketplace through which you enrolled

Are claiming an exemption from the requirement to have health coverage for anyone on your tax return

Will complete Form 8965, Health Coverage Exemptions,and submit it with your tax return

Still need to obtain a religious conscience exemption or a hardship exemption that can only be granted by the Marketplace

Should file an application with the Marketplace and follow the instructions below about how to report exemptions from the Marketplace on your tax return

Obtained an exemption from the Marketplace, and received your unique Exemption Certificate Number

Will enter the Exemption Certificate Number in Part I of Form 8965, Health Coverage Exemptions, and submit the form with your return

Applied for an exemption from the Marketplace, but do not currently have an Exemption Certificate Number

Will enter 'PENDING' in  Part I of Form 8965 Health Coverage Exemptions, and submit the form with your return

Are claiming an exemption that can be granted only from the IRS

Will not need an Exemption Certificate Number, but will complete Parts II and III of Form 8965, Health Coverage Exemptions, and submit the form with your return

Are able to obtain the exemption from either the IRS or the Marketplace

Should obtain the exemption from the IRS by completing Part II and III of Form 8965,Health Coverage Exemptions, and attach this form to your federal tax return when you file

Are making a shared responsibility payment because you did not have health coverage or qualify for an exemption for any month in 2014

Will enter the payment amount on line 61 of Form 1040, line 38 of Form 1040-A, or line 11 of Form 1040-EZ


 

Thank you,
  
George Knox, CLU, ChFC
214.695.2904 (mobile)
214.443.1400 (office)