Forms Pertaining to Your Health Plan:
Tax filing time is fast approaching, so it’s time to think about gathering the information you need to file your return. We want you to be aware that the Affordable Care Act has IRS requirements pertaining to your health coverage during 2015. Forms will be needed to accompany your tax return and we want to be sure you understand what they are:
FORM 1095-A: In late January, this form will be mailed by Covered California to anyone who had a health plan through the state exchange during 2014. It will contain information about the premium tax credits (subsidy) you received over the course of the year and how much was paid to the insurance company on your behalf. If you enrolled in more than one plan or with more than one carrier through Covered California during the year, you may receive more than one form.
FORM 8962 is to be used by Covered California subscribers to calculate the actual amount of subsidy received and to determine if that amount was correct, based on your actual modified adjusted gross income (AGI) for 2014. Remember: the premium assistance you received was originally based on an estimate of your annual AGI when you applied. Now you must reconcile whether your estimate was correct. If your AGI ended up less than your original estimate, you may receive an additional refund, but if your income was appreciably higher than expected, you may need to repay some or all of the premium assistance you received.
FORM 1095-B: If you had ANY KIND of health coverage (on or off-exchange) in 2014, you should receive this form from your health insurance company. It will indicate the names of covered individuals and the months that they had coverage. Again, if you had coverage through more than one carrier during the year, you will receive more than one form. While not required, if you receive a form you should submit it with your tax return in order to satisfy the individual mandate requirement of the Affordable Care Act. If you do not receive a 1095-B, you can just check the box on your tax return to indicate your coverage.
FORM 8965: This form is for those who wish to file a penalty exemption (see below).
All of these forms are available through the IRS, but we recommend consulting your tax advisor if questions arise.
Tax Penalties and Premium Assistance Pay-Backs
Those who were uninsured through all or part of 2015 may have to pay a penalty when filing their tax return. The penalty is $325.00 per adult, $162.50 per child or 2% of your total household income – whichever is higher. The family maximum is $925.00.
Those who will be reporting incomes substantively higher than the original estimate on which their premium assistance was based, may have to repay some or all of the subsidies. Consult your tax advisor if you have an income discrepancy.
Filing a Penalty Exemption
There are dozens of penalty exemptions available that can be claimed, including some for people who only had a short (up to 3 months) lapse in coverage or those for whom coverage would have been too expensive -more than 8% if their household income. Other hardship exemptions are available, such as a death in one’s family or extremely costly medical expenses. Such exemptions must be filed with Covered California via a paper application and will take several weeks to process. A list of possible exemptions is available here.