What individuals need to know about the ACA in 2015
Posted On: 2-2-2015 | Posted By: Debra Mathes, CPA
Since the Patient Protection and Affordable Care Act (ACA) was signed into law in 2010, each new year brings a new wave of implementation and new requirements. So, what do individual taxpayers need to know this year?
2015 will be the first year that Americans must prove they maintained minimum essential health coverage for each calendar month of 2014, which is reported on the 2014 tax return. Those who failed to comply with this individual mandate face a penalty called the “shared-responsibility payment.”
If you and members of your household complied with the coverage requirement for the entire 2014 tax year, you will simply check a box in the “Other Taxes” section on Line 61 of Form 1040, indicating you were covered. If you did not maintain coverage for the entire year, you will have to determine whether you were exempt from the requirement to carry minimum essential health coverage or compute the penalty for the individual shared-responsibility payment.
Minimum essential coverage
“Minimum essential coverage” is a term used to describe the type of health plan coverage an individual needs to have to meet the individual responsibility requirement under the ACA. Those covered by employer-sponsored health insurance are generally treated under the ACA as carrying minimum essential coverage. Other qualifying sources of minimum essential coverage include the ACA Marketplace, TRICARE, Medicare Part A, and CHIP, to name just a few. A key exception to minimum essential coverage is coverage that provides limited benefits, such as stand-alone dental insurance, workers’ compensation insurance and accident or disability income insurance.
New Form 8965, Health Coverage Exemptions
Individuals who are liable for the penalty must pay it when they file their tax return. The penalty amount due is calculated on worksheets in the instructions to the new Form 8965, Health Coverage Exemptions. For 2014, the individual shared responsibility payment is the greater of: (a) 1% of household income that is above the tax return filing threshold for the individual’s filing status or, (b) a flat dollar amount of $95 per adult and $47.50 per child, with a maximum of $285 for an entire family.
The form is also used to claim an exemption from the mandate and penalty for each applicable member of the taxpayer’s household. Many of the exemptions are quite technical, but they include:
- incarcerated individuals;
- those who are not U.S. citizens or nationals or are un-lawful aliens present in the United States;
- individuals who are unable to afford coverage;
- those who have a short gap in coverage of less than a three-month period; or
- or those who have household income below the applicable filing threshold.
Certain exemptions can be claimed on the tax return, but others must be claimed only after being granted by the health insurance exchange. Exemptions granted by a marketplace exchange or claimed on a tax return (or both, in some cases) include:
- members of a health-sharing ministry;
- members of certain religious sects;
- members of federally recognized Indian tribes;
- “hardship” exceptions based on low income that makes coverage unaffordable;
- circumstances that prevent the taxpayer from obtaining coverage; or
- being ineligible for Medicaid solely because the taxpayer resides in a state that has not participated in the Medicaid expansion under the ACA.
People who bought insurance through a state or federal insurance marketplace will receive a Form 1095-A in the mail from the exchange by January 31 or shortly after. This form, called the Health Insurance Marketplace Statement, will list which members of the household were covered and for how long, as well as premium costs and any advance payment received for premium tax credits.
Private health insurance providers have a corresponding reporting requirement, Form 1095-B, to report information about individuals who have minimum essential coverage to applicable taxpayers and the IRS. However, this reporting requirement was postponed until coverage year 2015, so you should not expect to receive the form for 2014 unless you had insurance from the federal insurance marketplace exchange.
Premium tax credit
Another ACA provision that affects taxpayers obtaining coverage from the marketplace exchange during 2014 is the premium tax credit. Eligible taxpayers will claim the credit on their 2014 tax return and must reconcile any advance premium tax credits already received during 2014. This can become an issue if a taxpayer receiving an advance credit had a change in circumstances during the year affecting the calculation of the credit, such as changes in family size, household income, or filing status.
For more information
Your WK advisor can answer any questions you might have regarding the ACA’s individual shared responsibility requirement. Contact us at (573) 442-6171 or (573) 635-6196.