Affordable Care Act Reminders for Tax Year 2016 Returns

Though the new Congress and Administration may substantially change the requirements for the Affordable Care Act, its current provisions remain in place for 2016 returns.

As we approach the beginning of the 2017 filing season here are some reminders about the Form 1095-A, exemptions from the requirement to have health insurance, and the increase in the individual penalty (individual shared responsibility payment) amount for 2016 federal income tax returns.

Importance of Form 1095-A

The Form 1095-A (Health Insurance Marketplace Statement) will be received by approximately 10 million individuals that obtained their 2016 health insurance at the Federal or a State Marketplace.

This form is needed in order to complete the 2016 Form 8962 (Premium Tax Credit) which calculates their Premium Tax Credit for 2016 and, for those who received a subsidy, to complete the reconciliation of the subsidy with the actual credit. Read more

Health Care Coverage Exemptions

Most individuals who did not have health insurance for all or part of 2016 probably qualified for an exemption. Therefore, it is important that before any penalty is calculated that an individual determines whether they may qualify for a health care coverage exemption.

If an individual qualifies for a health care coverage exemption they must complete the applicable parts of the 2016 Form 8965 (Health Coverage Exemptions) and include it with their 2016 federal tax return. Read more

Individual Penalty (Shared Responsibility Payment) for 2016

If it is determined that an individual does owe a penalty for Tax Year 2016, it is calculated as the greater of:

• 2.5% of the individual’s income that exceeds their 2016 filing threshold (personal exemptions plus standard deduction for their filing status);
  Or
• A flat dollar amount that is assessed for the taxpayer, spouse, and dependents as follows:
• $695 per taxpayer, spouse, and dependents over age 18
• $347.50 for each dependent under age 18

The maximum family flat dollar amount for 2016 is $2,085. Read more

Click here to read the entire CrossLink Tax Update that includes further information about the Form 1095-A, exemptions from the requirement to have health insurance, and the increase in the individual penalty amount for 2016 federal income tax returns.

Special 2016 Federal Marketplace Enrollment Period for Individuals without Marketplace Insurance Due to Failure to File a 2014 Federal Return and Reconcile

The Center for Medicare and Medicaid Services (CMS) which runs the Federal Marketplace has announced that there will be a special enrollment period that will run from now until March 31, 2016. This special enrollment period is for individuals previously determined to have been ineligible for the Advance Premium Tax Credit (subsidy) in 2016 because they failed to file a 2014 federal return and did not complete the required reconciliation on Form 8962 (Premium Tax Credit).

The special enrollment period specifically applies to individuals who:

• Are not currently enrolled in 2016 coverage through the Federal Marketplace;
• Are not receiving an Advance Premium Tax Credit (APTC) because they failed to file a tax return for 2014 and reconcile their 2014 APTC; and
• Subsequently filed their 2014 federal tax return and reconciled their 2014 APTC on Form 8962.

Click here to read the entire article on the CrossLink website.

Affordable Care Act – New Information Forms and How the ACA Relates to the Federal Tax Return

Below is an overview of the Affordable Care Act (ACA) related forms and the new information forms that all individuals who had health insurance in 2015 will receive during this coming filing season.

New Information Forms for the Upcoming 2016 Filing Season
There will be two new ACA related information forms that all taxpayers who had health insurance during 2015 will be receiving towards the end of March or early April of this coming filing season.

Since these two new information forms will be received late in the filing season, it is important to emphasize that they are for informational purposes only and are not needed to complete an individual’s 2015 federal tax return. Their purpose is to show individuals that they had health insurance during 2015, who was covered by their policy, and how many months they had coverage. They are essentially their proof that they had coverage during the year.

Form 1095-B (Health Coverage)
All individuals who had health insurance during 2015 will receive a Form 1095-B (Health Coverage) around the end of March 2016 from the insurance company that provided them coverage.

The Form 1095-B will give the individual policy holder the following information:

• The name, address, and SSN of each person covered by the policy
• The number of months each person was covered during the year
• The name of the health insurance issuer
• Name of Employer (if it is employer sponsored coverage)

Form 1095-C (Employer Provided Health Insurance Offer and Coverage)
All individuals that received health insurance from a company that had 50 or more full-time employees will receive a Form 1095-C (Employer Provided Health Insurance Offer and Coverage) around the end of March 2016.

The Form 1095-C will inform the employee of the following information:

• Name, address, and SSN of the employee
• Name and SSN of the employee’s dependents that were covered and for which months they were covered during 2015
• Name, address, and EIN of Employer
• For those who elected not to receive coverage, information on the coverage offered

It is also important to remember that none of the information on these two information returns is entered on the 2015 federal tax return. Therefore, it is not necessary for individuals to have received either of these two information forms in order to complete and file their 2015 federal tax return.

This is especially true for taxpayers who file in the early part of the filing season. Since they will not have received either the Form 1095-B or 1095-C, it is important to reiterate that the taxpayer may still file their 2015 federal tax return.

See the Questions and Answers about Health Care Information Forms for Individuals (Forms 1095-A, 1095-B, and 1095-C) on the IRS website for more information about the Forms 1095-B and 1095-C.

Affordable Care Act Related Forms
Below are the 2015 federal individual forms that are related to the Affordable Care Act:

• Form 1095-A (Health Insurance Marketplace Statement)
  This information return will be received by all individuals who purchased their health insurance from a Marketplace as follows:
  • Federal Marketplace – By end of this month (January). A copy will also be available via the individual’s account on healthcare.gov.
  • State Marketplace – No later than early February.
  
  
  The information included on Form 1095-A (Health Insurance Marketplace Statement) is needed to complete the Form 8962 for both the calculation of the Premium Tax Credit and to do the reconciliation of the credit with the Advance Premium Tax Credit (subsidy).
  See the Questions and Answers about Health Care Information Forms for Individuals (Forms 1095-A, 1095-B, and 1095-C) on the IRS website for more information on the Form 1095-A.

• Form 8962 (Premium Tax Credit)
  This form is completed by taxpayers who purchased their health insurance through a Marketplace and whose income is between 100% and 400% of the federal poverty line and are claiming a Premium Tax Credit.
  For individuals who received an Advance Premium Tax Credit (subsidy), this form must be completed in order to complete the reconciliation of the calculated Premium Tax Credit and the subsidy. If it is not included with the original return, the IRS will not complete the processing of the return until they receive a completed Form 8962, which will delay any refund shown on the return.
  The result of the calculation of the Premium Tax Credit and the reconciliation will be either a refundable credit or an additional tax.
  See the 2015 Form 8962 and the related instructions for more information.

• Form 8965 (Health Coverage Exemptions)
  Any individual who qualifies for an exemption from the requirement to have health insurance for all or part of 2015 will complete this form.
  For an explanation of what types of exemptions there are and how to apply for them, see the Exemptions section of the Affordable Care Act for Individuals page of the CrossLink Tax Resource Center.
  See the 2015 Form 8965 and the related instructions for additional information.

Form 1095-A, Health Care Exemptions, and Individual Shared Responsibility Payment (Penalty) for 2015

As we approach the beginning of the 2016 filing season, here are some reminders about the Form 1095-A, exemptions from the requirement to have health insurance, and the increase in the individual penalty (individual shared responsibility payment) amount for 2015 federal income tax returns.

Importance of Form 1095-A 
In early 2016, the Form 1095-A (Health Insurance Marketplace Statement) will be received by the approximately 10 million individuals that obtained their 2015 health insurance at the Federal or a State Marketplace. The Form 1095-A is needed by these taxpayers in order to complete the 2015 Form 8962 (Premium Tax Credit) to calculate their premium tax credit for 2015 and, for those who received a subsidy, to complete the reconciliation of the subsidy with the actual credit.

The 1095-A should be received:

• By those who used the Federal Marketplace – by January 31, 2016
• By those who used a State Marketplace – Early February 2016

A copy of the Form 1095-A will be available online for those who used the Federal Marketplace via their account on healthcare.gov. It may also be available online for those who used a State Marketplace as well.

Also, any taxpayer that received a subsidy must complete the Form 8962 and include it with their 2015 federal return. If the Form 8962 is not included with the original federal return, the processing of the return will not be completed until a completed Form 8962 is sent to the IRS.

Health Care Coverage Exemptions
Most individuals who did not have health insurance for all or part of 2015 probably qualified for an exemption. Therefore, it is important that before any penalty is calculated that an individual determines whether they may qualify for a health care coverage exemption.

If an individual qualifies for a health care coverage exemption, they must complete the applicable parts of the 2015 Form 8965 (Health Coverage Exemptions) and include it with their 2015 federal return.

To see a full listing of the exemptions and whether the applicable exemption must be applied for at the federal marketplace or can be requested when the 2015 federal return is filed, see the Health Care Exemptions section of the How the Affordable Care Act Affects Individuals on the Crosslink Tax Resource Center.

If an individual needs help in determining whether they qualify for an exemption, a Find Exemptions tool is available on the healthcare.gov website.

Individual Penalty (Shared Responsibility Payment) for 2015
If it is determined that an individual does owe a penalty for 2015, it is calculated as the greater of: 

• 2% of the individual’s income that exceeds their 2015 filing threshold (personal exemptions plus standard deduction for their filing status);

Or

• A flat dollar amount that is assessed for the taxpayer, spouse, and dependents as follows:
  • $325 for taxpayer, spouse, and dependents over age 18
  • $162.50 for each dependent under age 18
  The maximum family flat dollar amount for 2015 is $975.

The penalty amount is limited for 2015 to the annual national average premium for a bronze level health plan available through the Marketplace which is $2,484 per individual ($207 per month per individual) with a cap of $12,470 for a family with five or more members ($1,035 per month).

See pages 13 – 17 of the draft 2015 Form 8965 Instructions for more information on how the penalty is calculated.