When it comes to the health care law – also known as the Affordable Care Act or ACA – and how it may affect your taxes, there are many questions you might have. This information from the Internal Revenue Service offers news on trending topics and answers to questions the IRS is hearing.

For Your Information

Penalty relief related to advance payments of the premium tax credit for 2014

Just as taxpayers reconcile their tax withholding with their actual tax liability for refunds or make an additional payment accordingly, starting this year individuals benefiting from tax credits for Marketplace coverage will follow the same process. Normally, taxpayers may owe certain penalties for late payments or underpayment of estimated tax. However, to help smooth the process for the first year of the Affordable Care Act, the IRS will waive these penalties for eligible taxpayers if they resulted from repayment of excess advance payments of the premium tax credit for Marketplace coverage.

Taxpayers should get Form 1095-A from the Marketplace by early February

If you or anyone in your household enrolled in a health plan through the Health Insurance Marketplace in 2014, you’ll get one or more Form 1095-A, Health Insurance Marketplace Statements. These important tax documents will come from your federal or state Marketplace, not the IRS. You should not prepare a Form 1095-A for yourself.

You will receive the form in the mail from the Marketplace by early February. Use the information from the form to calculate the amount of your premium tax credit (PTC) to reconcile any advance credit payments sent on your behalf to your insurance provider and to file your tax return.

You should wait to receive your Form 1095-A before filing your tax return. It’s important that you have Form 1095-A in your possession before filing to ensure a complete and accurate return.

People are asking...

The IRS hears many questions about the health care law. Here are frequently asked questions from taxpayers.

1. What documentation or proof of insurance coverage do I have to submit with my return?

You do not need to attach documentation or proof of insurance coverage to your tax return. If you had coverage for yourself and everyone in your household for the entire year, you or your preparer will check a box on your tax return. Although nothing in the IRS rules or regulations require you to provide proof of coverage at the time you file, if you have documents that verify your coverage, you should show them to your tax preparer. The IRS will follow its normal compliance approach to filed tax returns, and may ask you to substantiate the information on your tax return. Therefore, you should keep these documents with your tax records.

2. Does everyone need to have health insurance coverage?

The Affordable Care Act requires you and each member of your family to have basic health coverage (called minimum essential coverage), qualify for an exemption from the requirement to have coverage, or make an individual shared responsibility payment when you file your federal income tax return. If you are not required to file a tax return and don’t want to file a return, you do not need to file a return solely to report your coverage or to claim an exemption.

3. What is considered “minimum essential coverage?”

Here are examples of insurance that qualifies as basic health coverage:

• Employer-sponsored coverage, including retiree coverage
• Health insurance purchased directly from an insurance company or through the Marketplace
• Medicare Part A coverage and Medicare Advantage plans
• Most Medicaid coverage
• Children’s health insurance program
• Health care programs offered by the Department of Veterans Affairs

4. My employer gives me the option of buying insurance through my job, but I can’t afford the premiums. Can I get insurance and financial assistance from the Marketplace?

You may have the option of purchasing insurance through the Marketplace. However, you will not be eligible for financial assistance in the form of the premium tax credit if the insurance offered by your employer is considered ‘affordable’ according to the health care law. An employer-sponsored plan is affordable if the portion of the annual premium you must pay for self-only coverage does not exceed 9.5 percent of your household income for 2014 (the 9.5 percent is indexed for inflation). If you enroll in an employer-sponsored plan – including retiree coverage – you are not eligible for the premium tax credit, even if the plan is unaffordable or fails to provide minimum value.

5. I don’t have a tax-filing requirement, but want to claim the premium tax credit; do I need to file a tax return?

If you want to claim the premium tax credit, you must file a federal income tax return. In addition, if you receive advance payments of the premium tax credit, you must file a tax return and use your return to reconcile the difference between the advance credit payments made on your behalf and the actual amount of the credit that you may claim. This requirement applies whether or not you would otherwise be required to file a return.

As always, if you have questions about any of the information listed above, please feel free to contact us here at Mierendorf. We’re happy to help!