By now, you have probably heard that the Affordable Care Act (ACA) requires most individuals to obtain minimum essential health coverage or pay a penalty. If you're like me, the word "penalty" makes you a little nervous--so below is a handy guide to help you avoid the penalty and give you a little background information.
1. When should I start thinking about this penalty?
If you don't have minimum essential health coverage, the penalty should be paid when you file your federal tax return (due April 15). If you do have health insurance through your employer, you need to be ready to prove it when you file your tax return.
2. Okay, great. How do I prove I have health insurance?
New for this year, you'll receive a form from your insurer or employer. The original idea was that you'd receive the new form by the end of January, the same timing as your W-2. However, in late December, the IRS extended this year's reporting deadline for insurers and employers to March 31, 2016, so a new form should be coming your way by March 31.
3. March 31? But that only gives me two weeks to file my taxes!
Don't sweat it--continue to file your taxes as normal. Their reporting delay does not mean a delay for employees. The IRS has clarified that you don't have to delay filing your tax returns because you haven't yet received your form. Back to question #2, here's what the government suggests to keep handy for proving you have health insurance:
• Insurance cards
• Explanation of benefits (EOBs)
• Statement(s) from insurers
• W-2 or payroll statement(s) reflecting health insurance deductions
• Record(s) of advance payments of the premium tax credit, and
• Other statements indicating an individual or family member had coverage.
4. That's a helpful list, and I probably have most of those items available, but how do I make sure the IRS receives my insurance card, EOBs, etc.?
This part is easy--you don't have to actually attach or mail your proof of insurance to the IRS. However, you should keep any documentation with your other tax records just in case.
Tax-filing procrastinators won't catch a lucky break this time. The April 15 filing deadline lives on. For more detailed information, check out ACA Reporting Deadline Delay Not a Tax Filing Delay for Employees.