"How the Health Care Law is Effecting Tax Returns"

Saturday, February 14, 2015

I recently received a tax update from the IRS providing details on how the health care law is effecting the preparation of tax returns this year. Most are aware that the Affordable Care Act contains tax provisions that will affect your 2014 income tax return and most will be affected by the individual shared responsibility provision this tax season. Although cumbersome, it is important to understand your role in the correct preparation and presentation on your 2014 tax return.

Despite some misunderstandings, only taxpayers who purchased coverage through the Marketplace will be affected by the premium tax credit. Those who enrolled in health insurance through the Marketplace should receive a Form 1095-A Health Insurance Marketplace Statement. These forms are provided by the Marketplace where the taxpayer purchased their coverage. Taxpayers may receive more than one Form 1095-A if different members of their household had different health plans, the plan was updated during the year or the taxpayer switched plans during the year. Taxpayers should receive their Form 1095-A by early February, if the taxpayer has not receive the form, they should contact the Marketplace from which coverage was purchased. Taxpayers should not hesitate to contact the state or federal Marketplace if they feel the information on Form 1095-A is incorrect. Form 1095-A identifies the dates of coverage, total amount of the monthly premiums for your insurance plan, information they may use to determine the amount of their premium tax credit, and any amount of advance payments of the premium tax credit. Form 8962, Premium Tax Credit (PTC,) is required to be filed and is utilized to reconcile advance payments of the premium tax credit made on a taxpayer's behalf to their insurance provider with the premium tax credit they are claiming on their tax return. Taxpayers must repay any excess advance payments of the premium tax credit.

If the taxpayer and everyone in their household had insurance coverage for the entire year, they will simply check the box on line 61 of Form 1040, line 38 on Form 1040-A, or line 11 of Form 1040-EZ and no additional forms are necessary. In the event that a taxpayer is claiming an exemption from the requirement to have health insurance coverage for anyone on their tax return, a Form 8965, Health Coverage Exemptions, will need to be submitted with their tax return. A taxpayer needing to obtain a religious conscience exemption or a hardship exemption must file an application with the Marketplace. If the exemption is granted, the taxpayer will receive an Exemption Certificate Number which must be entered in Part I of Form 8965 and be submitted with their tax return.

For taxpayers who are making a shared responsibility payment because you did not have health coverage or qualify for an exemption for any month in 2014, the payment amount should be entered on Line 61 of Form 1040, line 38 of Form 1040-A or line 11 of Form 1040-EZ.

To help navigate these changes, taxpayers should consider filing their tax returns electronically, utilizing tax software. Using tax preparation software is the best and simplest way to file a complete and accurate tax return because it guides individuals and tax preparers through the process and does all the calculations. For those who do not have the funds to purchase a tax software package or can't afford to pay to have the tax return prepared, the University of Missouri Extension still has openings to prepare their tax return for free at the Kennett Nutrition Center. Call Sharon Montgomery at 573-888-9852 to make an appointment.

S. Don Ray, MBA, CPA is a Family Financial Education Specialist at the University of Missouri Extension.

The University of Missouri Extension office is open Monday -- Friday, located in Kennett, Missouri at 233 North Main Street. Contact 573-888-4722 with questions or comments. MU is an equal opportunity/ADA institution.

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