Due to Obamacare/the Affordable Care Act, tax preparation for tax year 2014 is going to be even more complex and time-consuming than ever. The “individual mandate” to have health insurance began in 2014 and starting this upcoming tax season, I and other tax preparers are going to need to collect additional paperwork from our clients.
First, the following is a recap of the relevant tax provisions:
- All individuals are required to have insurance for at least one day in a month, qualify for an exemption, or pay the individual mandate penalty (officially, the “shared responsibility payment”).
- All individuals who are required to file a tax return must report their insurance on that tax return and report themselves as one of four categories:
- Individuals who have qualifying insurance through the exchange;
- Individuals who have qualifying insurance through an employer or Medicare;
- Individuals who did not get qualifying insurance and do not have an exemption (and who will pay the penalty); or
- Individuals who did not get qualifying insurance but an exemption to the penalty exists.
Please note that not all members of your family will necessarily have the same category as each other. Furthermore, each individual may have multiple categories during the year, since the insurance mandate is tested on a month-by-month basis.
Once we have determined the proper categorization for each individual, it will be necessary to collect the information required to be reported on your tax return. Those who have insurance through an exchange will receive Form 1095-A, Health Insurance Marketplace Statement. Those who have insurance from Medicare will receive a statement from Medicare. Those who receive insurance through an employer will receive Form 1095-B or 1095-C, however, if neither of these forms are available, a copy of the insurance policy will provide us with the necessary information. If you are unable to provide any documentation to us but know that you had qualifying coverage, we will prepare a statement for your signature certifying that you have qualifying coverage.
Lastly, those who are exempt from the individual mandate will not have to pay the shared responsibility payment. However, some exemptions require a certificate from an exchange and we will be unable to claim an exemption without a copy of the certificate. Examples include those who are members of certain religious sects, those who are unable to afford “affordable coverage”, those whose health insurance plan was not renewed and other plans were not affordable, and those who had other issues, such as foreclosures, bankruptcy, illness or death in the family, etc. that prevented them from getting insurance.
As with all new tax laws, correctly reporting your tax liability is getting more complicated, not less so. If you think that you may qualify for an exemption or if you would like to discuss the individual health insurance mandate as it applies to your individual tax situation, please contact us to schedule a consultation.