IRS and HHS: Prepping for Your Tax Season PPACA Questions

IRS and HHS: Prepping for Your Tax Season PPACA Questions

IRS-logoThe Treasury Department and the Department of Health and Human Services are getting ready for the tax-filing season (for tax year 2014) and the onslaught of questions they anticipate about the Affordable Care Act.

The Obama Administration has prepared some resources and online tools to help individuals connect with local tax preparation services and determine if they’re eligible for an exemption from PPACA’s (individual) health insurance mandate. The administration said it intends to continue to work with “top tax preparers” to provide consumers with the information they need to prepare for tax season. While including health insurance information will become a routine step in filing taxes, this is the first time families will be asked to answer basic questions regarding their health insurance on their tax returns, the administration noted. Millions of Americans who get their health insurance through their jobs are affected by the Affordable Care Act, and millions of others who have signed up for the health insurance marketplaces have received financial assistance through premium tax credits to lower their monthly premiums.

 What’s New this Year? 

Starting this year, consumers will see some changes to their tax returns. The Treasury Department and HHS noted that over three-quarters of tax filers will only need to check a box on their tax return indicating they had health coverage in 2014. However, people who have coverage through the health insurance marketplaces, or decided not to enroll in coverage, should be aware of some additional steps that will be a part of the tax filing process starting this year.

Those with coverage from one of the health insurance marketplaces will receive a new form in the mail from the marketplace, Form 1095-A, which they will use to reconcile their upfront financial assistance. While those who can afford to buy health insurance and choose not to will have to pay a fee, individuals who can’t afford coverage or meet other conditions can receive an exemption.

“For the vast majority of Americans, tax filing under the Affordable Care Act will be as simple as checking a box to show they had health coverage all year,” said Treasury Secretary Jacob J. Lew in a statement. “A fraction of taxpayers will take different steps, like claiming an exemption if they could not afford insurance or ensuring they received the correct amount of financial assistance. A smaller fraction of taxpayers will pay a fee if they made a choice to not obtain coverage they could afford. We are working to ensure that whatever their experience, consumers can easily access clear information since this is the first year they will see certain changes to their tax returns.”

From the IRS’ most recent E-mail

Along with a few new lines on existing forms, there will also be two new forms that will need to be included with some tax returns. While most taxpayers will simply need to check a box on their tax return to indicate they had health coverage for all of 2014, there are also new lines on Forms 1040, 1040A, and 1040EZ related to the health care law. To help navigate these changes, taxpayers and their tax professionals should consider filing their return electronically. Using tax preparation software is the best and simplest way to file a complete and accurate tax return as it guides individuals and tax preparers through the process and does all the math. There are a variety of electronic filing options, including free volunteer assistance, IRS Free File for taxpayers who qualify, commercial software, and professional assistance.

In the coming weeks, consumer-friendly tools and resources will be made available for those tax filers who have health coverage through the health insurance marketplaces, those seeking an exemption, and those looking for information about the fee for those who could afford to purchase health coverage but chose not to.  General resources can be found at www.IRS.gov/ACA or https://www.healthcare.gov/taxes/.

The administration cited several online documents already available from the IRS on Health Care Law: What’s New for Individuals & Families, and from HHS on 3 Tips About Marketplace Coverage & Your Taxes and No Health Coverage? What That Means for Your Taxes.

To reach consumers with the information they need to prepare for the upcoming tax season, the administration plans to employ a variety of outreach and consumer education efforts, including direct outreach to marketplace enrollees. Through email, phone and text messages the administration will reach out to people who received coverage through the health insurance marketplace with personalized information that is most relevant to their tax status. The administration will focus on providing targeted messaging to consumers who benefited from an advanced premium tax credit last year to help them offset the cost of their marketplace premiums.

“Last year, millions of Americans purchased quality, affordable health coverage through the marketplace, and the vast majority received tax credits that cut their monthly premiums,” said Health and Human Services Secretary Sylvia Burwell in a statement. “This benefit, which in many cases helped make the cost of health care less than the cost of a cell phone or cable bill, enabled these consumers to enjoy the benefits of coverage throughout the year. In the coming weeks, HHS will work with other agencies, tax preparers and community organizations to arm these consumers with the information they need to know as they prepare to file their taxes. We will also be providing helpful tools so that the millions of taxpayers who qualify for an exemption can receive one.”

Here is information about the new forms and updates to the existing forms:

Form 8965, Health Coverage Exemptions

  • Complete this form to report a Marketplace-granted coverage exemption or claim an IRS-granted coverage exemption on the return.
  • Use the worksheet in the Form 8965 Instructions to calculate the shared responsibility payment.

Form 8962, Premium Tax Credit

  • Complete this form to reconcile advance payments of the premium tax credit, and to claim this credit on the tax return.

Additionally, if individuals purchased coverage through the Health Insurance Marketplace, they should receive Form 1095-A, Health Insurance Marketplace Statement, which will help complete Form 8962.

Form 1040

  • Line 46: Enter advance payments of the premium tax credit that must be repaid
  • Line 61: Report health coverage and enter individual shared responsibility payment
  • Line 69: If eligible, claim net premium tax credit, which is the excess of allowed premium tax credit over advance credit payments

Form 1040A

  • Line 29: Enter advance payments of the premium tax credit that must be repaid
  • Line 38: Report health coverage and enter individual shared responsibility payment
  • Line 45: If eligible, claim net premium tax credit, which is the excess of allowed premium tax credit over advance credit payments

Form 1040EZ

  • Line 11: Report health coverage and enter individual shared responsibility payment
  • Form 1040EZ cannot be used to report advance payments or to claim the premium tax credit

Links:

For more information about the Affordable Care Act and filing your 2014 income tax return visit IRS.gov/aca. http://www.irs.gov/Affordable-Care-Act