Your 2014 Tax Return and the Affordable Care Act

Feb 10, 2015

The Affordable Care Act requires everyone to maintain health insurance for themselves and their family members (with a limited number of exemption)s. New for 2014, taxpayers will need to verify compliance with this mandate on their individual income tax return.

For each month of 2014, taxpayers and everyone claimed on their return must do one of the following: (1) maintain minimum essential coverage, (2) qualify for a coverage exemption, or (3) make a shared responsibility payment with their tax return. Those individuals covered by a qualified plan for the entire year need only “check a box” on the Form 1040 attesting to their coverage. A new form, 8965, is used to report an exemption from the coverage requirements. This same form and its instructions are used to calculate the shared responsibility payment.

Individuals who purchased health insurance coverage through the Health Insurance Marketplace will receive a Form 1095-A showing the advance payments of the premium tax credit they have received. This information will then be used to complete new Form 8962 to “true up” the actual credit they were eligible for against the amounts they received in advance. Any credits they have due will increase a tax refund; if they calculate too much credit received in advance, the difference will reduce their tax refund.

Under the coverage provisions, a taxpayer is liable for not only himself or herself, but also for any individual the taxpayer can claim as a dependent. Therefore, children must be covered under a qualified plan or the parent will be liable for the shared responsibility payment.

Senior citizens are not exempt from the coverage rules. However, Medicare Part A, Medicare Advantage, Medicaid, and TRICARE programs are qualified health insurance plans.

If your income tax return is prepared by a professional return preparer, be ready to document your health insurance coverage for the year so the return will be accurate.

By: George Monger, CPA

Categories: Healthcare & Dentistry