Obamcare Taxes: 5 Key Things to Know Before Filing

By January 5, 2015 Uncategorized No Comments

The 2015 tax season will be a bit different with Obamacare. If you enrolled in a plan last year and received subsidies to lower your costs, then you’ll need to take a couple extra steps to ensure that you receive the right amount during the year. If you didn’t enroll, then you’ll likely have to pay a fine unfortunately that’s $95 per adult or 1% of your salary, whichever is higher (note, you can avoid this penalty next year by enrolling for 2015).

This year, the IRS will collect shared responsibility payments from people who didn’t sign up for health insurance at all in 2014. Certain people will be excluded automatically, but most will have to pay their fair share when they file their returns. Before you sign off on your return this spring, here are five key things you need to know.

#1: If you received a subsidy, you’re projected salary will need to match your actual salary.
If you received a subsidy to help lower the cost of your premiums, then you’ll need to justify your income this year. Subsidies are also referred to as advance premium tax credits because they act as an advance made by the federal government to you. Consumers had the option in 2014 to apply the credits to their premiums, use a smaller portion of the credit throughout the year or save the credits for tax season.

When you file your taxes, you’ll need to note the premium tax credit on a new form, which we discuss in the next section. Those who applied the credit to their premiums will need to verify that they reported the proper income. If you underestimated your income, you may owe a portion of the credit back. If you overestimated your income, then the government will reimburse the difference to you. Those who held off on receiving their credits will have the amount applied to their refunds or the amount that they owe the IRS.

#2: There are new forms you need to use
The IRS has created a new form specifically designed for reporting premium tax credits in 2015. In late January the IRS will send out a new tax form to you that lists the amount of your subsidies you used for 2014. Called a 1095-A, the new form will show you exactly how much you earned in advance tax credits.

Once you receive that form, report the total figure in the appropriate section of “Form 8962.” This new form will be readily available in all online software products or directly through the IRS website. Using this form, you’ll report the amount of subsidies you received and whether there are any discrepancies in the amount you should have received based on your income. To report exemptions, you’ll use Form 8965, which is another new form created specifically for the ACA.

#3: Some companies offer free Obamacare tax support.
You’re not alone this season when it comes to figuring out your responsibilities under the law. Several accounting firms offer free support for those who need help understanding how the ACA impacts their taxes. In early January, H & R Block offered free counseling sessions. You may also find that local firms and national online software companies, such as e-file.com, provide step-by-step guides for completing your taxes this year. Take advantage of free assistance where possible to make sure you’re filing the right forms.

#4: Avoid next year’s tax penalty and sign up for a plan today (note: deadline is Feb 15, 2015)
As the deadline looms for the Affordable Care Act’s second enrollment season, many people have switched gears to focus on taxes. If you haven’t had a chance to enroll in a health insurance plan yet, then don’t wait. There’s still time to sign up for a plan on or off the marketplace for 2015. Last year, consumers had six months to enroll in health insurance, and the government was fairly lenient about extensions due to the new system and technological issues. That won’t be the case for next year.
In 2016, the penalty fee increases substantially to $325 per individual or 2 percent of your total taxable income, whichever is greater. The fee continues to rise each year according to inflation, so you need to make a decision about health insurance soon to avoid the penalty. You have until Feb. 15 to sign up on the marketplace or enroll in a private plan. Coverage will begin March 1 for people who enroll by the deadline.

#5: Didn’t sign up in 2014? Check if you qualified for a special exemption
If you didn’t sign up for health insurance last year, then you may be able to claim an exemption that lets you off the hook for paying the shared responsibility fee. However, exemptions are typically reserved for those who qualify based on extreme life situations, religious affiliation or other unchangeable circumstances. The IRS offers a complete breakdown of the available exemptions that taxpayers can apply for, but keep in mind that some exemptions are only available through the marketplace. If you normally don’t pay taxes based on your income, then you don’t need to worry about filing for an exemption. The IRS won’t charge you the penalty fee.

In 2016, the penalty fee increases substantially to $325 per individual or 2 percent of your total taxable income, whichever is greater. The fee continues to rise each year according to inflation, so you need to make a decision about health insurance soon to avoid the penalty. You have until Feb. 15 to sign up on the marketplace or enroll in a private plan. Coverage will begin March 1 for people who enroll by the deadline.

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