On December 22, 2017, The Tax Cuts and Jobs Act was signed into law. The information in this article predates the tax reform legislation and may not apply to tax returns starting in the 2018 tax year. You may wish to speak to your tax advisor about the latest tax law. This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
Article Highlights:
- New tax return complexities caused by Obamacare
- Penalty for not being insured
- Premium assistance credit
- Insurance marketplace subsidies and possible repayments
- New 1095 series reporting forms
Obamacare – or, more officially, the Affordable Care Act (ACA) – insurance mandate, along with its health insurance premium subsidies available from insurance marketplaces, premium tax credit (PTC), and penalty for not being insured, is going to affect just about every taxpayer in one way or another.
It is important for everyone to understand that new, substantial, and sometimes complicated reporting requirements have been added to the 2014 tax return to facilitate the ACA insurance mandate. As a result, taxpayers need to be prepared for a variety of new forms they will be receiving starting in January 2015 from their insurance companies, employers, and the marketplace that they will need in order to prepare their tax returns.
These forms, which are also filed with the government, will:
- Provide proof of ACA acceptable monthly insurance coverage for all family members that you will use on your 2014 tax return to avoid being assessed a penalty for not being insured.
- Provide the government, and you, with the amount of monthly advance premium tax credit (APTC) – sometimes referred to as a premium subsidy – you may have benefited from if you purchased health insurance from a government-run insurance marketplace (also known as an exchange). These amounts are needed to determine if you are entitled to an additional PTC or if you must repay some portion of the APTC. The insurance marketplaces will provide this information on a Form 1095-A. Private insurance companies will provide proof of coverage on Form 1095-B.
To make matters worse, the IRS is letting both employers and insurance companies use alternative means of providing the required information for 2014, which means you will need to watch out for substitute reporting not included on the official IRS forms.
All of this additional reporting and allocating, if necessary, greatly adds to the complexity of 2014 tax returns, especially for taxpayers who qualify for the PTC and those who’ve received APTC through the marketplace. If you have friends or family members who may need assistance with this new tax return complexity, please suggest they contact this office.