Phoenix Business Accountant | ACA and Taxes
No doubt you have heard on the news or read in the paper that you are now required to have health insurance or you face a penalty when you file your 2014 income tax returns. But how does this really affect the average tax payer? In this article we will go through the 3 possible scenarios and how they will impact your tax returns.
The first example would be if you enrolled in a health insurance plan through your employer, bought private insurance on your own or were covered by Medicare or Medicaid. If this is you, then you won’t have any impact on your tax return since you will have maintained “minimum essential coverage.” Per the affordable care act, there was a provision called the individual shared responsibility provision, which required each individual to have minimum essential coverage for each month of the year. Individuals are allowed a lapse in coverage that cannot exceed 3 months. This allows for a job change. However, this lapse is only allowed one time per year.
The second example would be if you purchased a health plan the Health Insurance Marketplace. If this is you, you will need to file Form 8962 with your 2014 tax return. This form will calculate the Premium Tax Credit. This tax credit is unusual because most people chose to receive this credit (subsidy) throughout the year when they purchased the plan through the marketplace. When you applied for the policy, you had to estimate your income to determine how much of a subsidy you qualified for. When you file your tax return, you will file form 8962 to determine the amount of the credit you actually qualified for. If you overestimated your income when you applied for the insurance, you are eligible to receive the remainder of the subsidy as a refundable tax credit. On the other hand, if you underestimated your income, the opposite will happen. You will owe the government the amount of the subsidy that you didn’t qualify for.
The third example would be if you didn’t have health insurance at all in 2014. In this scenario, you face the a tax penalty unless you qualify for one of the following exemptions: Indian Tribe membership, health sharing ministry membership, religious sect membership, incarceration, exempt non-citizen or economic hardship. You must go through a process to obtain an exemption and receive a certificate of exemption. The tax penalty, otherwise known as the “individual shared responsibility payment” is based on family size and income level. It is also prorated based on the number of months you are uninsured. For 2014, the annual one-time tax penalty will be the greater of, $95 per adult and $47.50 per child, or 1% of your household income.
If you have questions or would like to discuss this further, do not hesitate to contact Dusseau & Makris, PC, your Phoenix CPA firm or visit www.healthcare.gov.