Tax Time and the Affordable Care Act

Published on Thu, 03/26/2015 - 23:32
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Employers got relief from new Affordable Care Act IRS reporting for the 2014 tax year. However, individuals and families did not. As individuals begin to seek assistance preparing their taxes for the 2014 tax year, we are hearing reports of tax preparers being confused about some of the changes this year. For example, some tax preparers have asked individuals to obtain a Form 1095 from their employers.  However, as mentioned in our previous post, Form 1095-A is being sent to individuals only if they purchased coverage from a state or federal exchange/marketplace.  Employers and insurers are not required to send forms 1095 B or C for the 2014 tax year.  If your preparer is confused, the IRS released a best practices guide for tax preparers on the topic of the Affordable Care Act and the individual mandate. In addition, the IRS has a new resource page on the Affordable Care Act tax provisions for individuals and families.

If you did get a Form 1095-A and purchased coverage through a federal marketplace, you may want to hold off on filing your tax returns.  Last week we heard that about 800,000 taxpayers who enrolled in policies through HealthCare.gov received incorrect tax information. If you already filed your taxes using the erroneous information, you will not be penalized if you do not amend your tax filing. However, you may want to amend your filing if the result is a bigger tax return.

Last week the administration also announced that despite open enrollment ending on February 15, a new special enrollment period will allow certain people more time to buy health insurance through HealthCare.gov. This decision was based on the understanding that many people will not realize they were required to buy insurance or know that they would have to pay a tax penalty if they did not until they file their 2014 taxes, which may be after February 15, 2015. To qualify for the new special enrollment period, individuals must certify that they filed their tax returns and paid a penalty for not having coverage in 2014. They must also certify that they first understood the implications of the shared responsibility payment after February 15 in connection with preparing their 2014 taxes.

While this special enrollment period only applies to individuals who live in states with a federally facilitated Exchange/Marketplace, a number of states that run their own health care Exchanges/Marketplaces – for example, California, Vermont, Minnesota, and the state of Washington – have announced that they will create a special enrollment period for individuals who are subject to an individual mandate penalty in 2014.

For more information on the Affordable Care Act, please contact Heffernan Benefit Advisory Services