Individuals Who Opted to Not Take Advance Premium Tax Credit and Form 1095-A (Health Insurance Marketplace Statement)

If an individual opted to not receive an advance premium tax credit (subsidy) when they obtained their health insurance through the Federal Marketplace, the Form 1095-A (Health Insurance Marketplace Statement) that they receive will have zeros in Part III, column B (Monthly Premium Amount of Second Lowest Cost Silver Plan – SLCSP) for the months that they had health insurance in 2014.

In order for these individuals to be able to calculate a premium tax credit on Form 8962 (Premium Tax Credit), they must enter an amount greater than zero for the Second Lowest Cost Silver Plan in Part II, column B. To determine what this amount should be, the individual can use the Find 2014 Silver Plan Premium look up tool on the healthcare.gov website.

Here is the information an individual will need to determine the Second Lowest Cost Silver Plan amount using the tool:

• Zip Code and County where they lived each month in 2014
• Age of each family member covered
• Months each family member was covered and was not eligible for other coverage outside the marketplace.

If the individual obtained their insurance through one of the 15 State Marketplaces and did not receive a subsidy, then Form 1095-A, Part III, column B may contain zeros for the months that they had health insurance during 2014. If this is the case, they will need to go to the applicable State Marketplace website to determine what the Second Lowest Cost Silver Plan amount should be as follows:

• California – Form 1095-A Information
• Colorado – Find the Second Lowest Cost Silver Plan Premium
• Connecticut – Silver Plan Premium Calculator
• District of Columbia – SLCSP Calculator
• Hawaii – Contact Information
• Kentucky – Benchmark Plan Tool
• Maryland – SLCSP Worksheet
• Massachusetts – General website
• Minnesota – Silver Plan Look up Tool
• Nevada – SLCSP Table
• New York – SLCSP table
• Oregon – SLCSP Lookup Tool
• Rhode Island – Tax FAQs page
• Vermont – Tax Questions page with SLCSP information
• Washington – SLCSP Lookup Tool

IRS Update: Affordable Care Act and the 2014 Federal Return

As the beginning of the 2014 filing season is upon us, now is the time to emphasize the importance of the Form 1095-A for taxpayers that received an advance premium tax credit (subsidy) in 2014, as well as remind everyone of how the Affordable Care Act will affect all 2014 federal returns.

Importance of Form 1095-A (Health Insurance Marketplace Statement) for Individuals Who Received an Advance Premium Tax Credit (Subsidy)

For individuals who received an advance premium tax credit (subsidy) that reduced their monthly health insurance premiums, it is necessary to have the Form 1095-A in order to complete the Form 8962 (Premium Tax Credit) because it contains the information that is needed to both calculate the premium tax credit and complete the reconciliation of the subsidy with the calculated credit.

Since the filing season begins on January 20, 2015, and a large number of the individuals who received a subsidy will not receive their copy of the Form 1095-A until the first week of February, tax preparers should not complete and file a return of an individual who obtained their health insurance through a Marketplace until they have received a copy of the Form 1095-A – allowing them to complete and include Form 8962 with the return. Read More

All Individual Federal Returns Will Be Affected by the Affordable Care Act

Everyone who files a 2014 federal tax return will be affected in one of the following ways by the Affordable Care Act:

• Most individuals will only have to check the Full Year Coverage box on Form 1040 since they were covered by their employer, government program (such as Medicaid or Medicare), or private insurance purchased outside of Marketplace for all of 2014.
• Taxpayers who obtained their health insurance at the federal or a state marketplace will:
• Receive Form 1095-A (Health Insurance Marketplace Statement) from the federal or state Marketplace around January 31, 2015;
• Complete Form 8962 (Premium Tax Credit) to claim the Premium Tax Credit and, if they received an advance premium tax credit (subsidy), complete the required reconciliation.
• Read More

Click here to read the entire CrossLink Tax Update on how the Affordable Care Act affects 2014 Tax Returns.

IRS Update: Individual’s 2014 Federal Return and the Affordable Care Act

As we get closer to the beginning of the 2015 filing season, it is important to understand how the Affordable Care Act will impact every individual who files a 2014 federal return. They may be impacted in a small way or major way depending on their health insurance status and where they obtained their health insurance during 2014.

Since the majority of taxpayers will be covered for the entire year by their employer, a government sponsored plan (such as Medicaid or Medicare), or from other qualifying health insurance, they will only need to check the Full Year Coverage Checkbox on Form 1040, line 61.

Taxpayers who purchased their health insurance at the Marketplace (State or Federal Exchange) will need to do the following:

• Taxpayer will receive by mail a Form 1095-A (Health Insurance Marketplace Statement) from the Marketplace. This information return should be received by the taxpayer by January 31, 2015 and will include details needed to complete the premium tax credit and do the reconciliation if they received an advance premium tax credit (subsidy) that helped pay their monthly health insurance premiums during 2014.
• Complete Form 8962 (Premium Tax Credit)
• Calculate the premium tax credit based on their 2014 income and family size.
• Enter the advance premium tax credit (subsidy) information from Form 1095-A, Part III, if applicable.
• Read more

Taxpayers who did not have health insurance for 2014 will do one of the following:

• Complete Form 8965 (Health Coverage Exemptions) to claim an exemption from the health care coverage requirement;

Or

• Have to pay shared responsibility payment (penalty) which will be calculated according to a worksheet in the Form 8965 instructions and entered on Form 1040, line 61.

Click here to read the entire CrossLink Tax Update that includes further information on individual's 2014 federal returns and the Affordable Care Act.

Form 8962 (Premium Tax Credit) and Related Form 1095-A (Health Insurance Marketplace Statement)

As we approach the 2015 filing season, now is a good time to clarify how the new Form 8962 (Premium Tax Credit) is laid out and how the Form 1095-A (the information an individual will receive from the Marketplace) is related to the calculation of the premium tax credit for Tax Year 2014.

Form 1095-A (Health Insurance Marketplace Statement)
Any taxpayer who obtained their health insurance through a federal or state exchange (Marketplace) will receive Form 1095-A (Health Insurance Marketplace Statement) in the mail by January 31, 2015. The information on this form will be used to calculate the Premium Tax Credit, especially if the individual received assistance in paying for their health insurance premiums (advance premium tax credit).

Since this information return looks very different from a W-2 or 1099 that an individual is used to receiving, some education for your customers will be necessary to ensure that they understand what Form 1095-A is for and the importance for them to keep it and include it with the rest of their tax information when they have their 2014 federal tax return completed.

If the taxpayer loses the Form 1095-A, a copy may be obtained from the Marketplace where they received their health insurance.

The Form 1095-A (Health Insurance Marketplace Statement) will show the taxpayer the following information:

• Advance premium tax credit (subsidy) they received (if any) to help pay for their monthly premiums. This is shown by month in Part III along with the total for the year. The information reported in Part III will be used to complete Form 8962 (Premium Tax Credit), Part 2 (Premium Tax Credit Claim and Reconciliation of Advance Payment of Premium Tax Credit).
• Health insurance coverage information including a listing of all members of the household who were covered.

See the current draft of Form 1095-A to see how it looks and how it is different from other information returns such as a W-2 or 1099.

Form 8962 (Premium Tax Credit)
This form will be used by any taxpayer who obtained their insurance through the Marketplace and are eligible for the premium tax credit. In most cases, the taxpayer will have received an advance premium tax credit (subsidy) during the year to help pay their monthly health insurance premiums.

It is important to remember that any taxpayer who received a subsidy must complete Form 8962 and reconcile the calculated premium tax credit based on their actual 2014 income and family size with the advance premium tax credit (subsidy) that they received during the year. Also remember that the subsidy went directly to the insurance company and not the taxpayer.

If the taxpayer is required to include the Form 8962 (Premium Tax Credit) with their return and they do not, the following will occur:

• The IRS will not complete processing the return until they receive the Form 8962. This means their refund will be delayed and they will receive a notice from the IRS requesting the Form 8962 be completed and sent to them.
• The taxpayer can be denied an advance of the premium tax credit (subsidy) in future years.

See the current draft of Form 8962 to see what it looks like and how the credit is calculated.

To recap, any individual who obtained their health insurance through the marketplace will receive a Form 1095-A (Health Insurance Marketplace Statement) in the mail by January 31, 2015. If they opted (as most individuals will have done) to receive an advance premium tax credit (subsidy) to help pay for their monthly health insurance premiums, that information will be reported on the Form 1095-A which must be included on Form 8962(Premium Tax Credit) as part of the calculation of their premium tax credit and included with their 2014 federal individual income tax return.

Finally, remember that the calculation of the Premium Tax Credit is a three-step process as follows:

• Step 1 – Calculate the actual premium tax credit for 2014 based on the taxpayer’s 2014 income and family size.
• Step 2 – Enter the advance premium tax credit that the taxpayer received each month of 2014.
• Step 3 – Subtract the advance premium tax credit from the calculated premium tax credit which will result in a:
• Refundable credit if the calculated credit is greater than the total advance premium tax credit (which will be reported on Form 1040, line 69); Or
• Additional Tax if the total amount of advance premium tax credit is greater than the calculated premium tax credit (which will be reported on Form 1040, line 46).