Last week it was reported that more than 540,000 people selected health insurance through the HealthCare.gov platform and even more people signed up through the state-based marketplaces in the first week of open enrollment. It is likely that the increase in "The Penalty" for not having coverage, which will be $695 per person, plays a substantial role in those numbers.
With regard to your taxes, the Affordable Care Act has four main areas: reporting your coverage, applying for any exemptions you might be eligible for, claiming and reconciling the premium tax credit, and determining if you owe an Individual Shared Responsibility Payment, which is the name we tax geeks use to refer to "The Penalty." In this blog, we will focus on the first two parts: reporting coverage and applying for exemptions.
It is likely that you, like many other Americans, had full-year health insurance coverage from your employer, so when it comes to tax time you will simply check a box indicating you had "Full-year coverage" on your tax return. When you have employer coverage you should receive Form 1095-B, 1095-C, or both by January 31. These forms are for your records, they do not have to be filed with your return - so there is no reason to wait for them before filing. As long as you have all your forms W-2 and other required forms, go ahead and file your return as early as possible. Be sure to save any forms 1095 along with your other important tax documents in case you need to reference them at some point. And, if you had coverage for the entire year, not only do you have less tax work to do but also you won't have to worry about reconciling advance payments or figuring that pesky "Penalty."
If you had a gap in coverage, or didn't have any at all, then the first thing you should do is research the available exemptions. Generally, exemptions fall into three categories, those that are granted by the marketplace, those you claim on your tax return, and those you can apply for either via the marketplace or claim on your tax return.
For marketplace-granted exemptions, you will need to enter the Exemption Certificate Number (ECN) on your tax return. It is best to apply early for the exemption so you have the ECN when it comes time to file your tax return. To help you determine which ones may apply to your household, use the Exemptions tool on HealthCare.gov webpage.
If you don't have a marketplace exemption, you may still qualify for one when you file your tax return. File Form 8965, Health Coverage Exemptions, to report any exemption number you do have and to claim any other exemptions. Use Part II to claim an exemption if your income is below the filing threshold for your filing status but you still need to file a tax return. Keep in mind that you don't need to file a tax return only to claim an exemption as it is automatically granted in this case so a return is not necessary. Claim other coverage exemptions in Part III of the form.
To help you determine if you are eligible for an exemption or are required to pay the penalty, use the IRS' Interactive Tax Assistant tool. If you or any of your dependents don't have full-year coverage that meets the requirements then you will have to pay "The Penalty," which could be as much as $695 per adult this year.
When it comes to filing your taxes this year, you will either: report that you (and your dependents) had minimum essential coverage; claim an exemption; or pay "The Penalty." It seems simple, but if you need help figuring out how your 2015 health coverage affects your taxes, then consult a tax pro.