Tax Accounting CPA

Phoenix Business Accountant | Obamacare Tax Problems

With its implementation, the Affordable Care Act brought with it tons of potential related income tax issues for CPAs and individuals who file their own income tax returns.

Employer Shared Responsibility Effective on January 1, 2015, one of the largest components of the ACA, the employer’s shared responsibility, gets implemented. All businesses with 100 or more employees are required to offer health insurance to their employees. All employers will also have reporting requirements as well. Employers will be forced to file form 1095-C with the IRS and their employees by the January 31, 2016. This form will contain the information the employees will need to prepare their 2015 income tax returns.

Minimum Essential Coverage For the 2014 income tax year, there are no required reporting to be done. The only thing to worry about is: did the taxpayer have minimum essential coverage. If the taxpayer purchased their health insurance through the ACA website, this would be classified as a bronze plan. If they had private insurance, they should check with their insurance provider to verify that their plan qualifies as minimum essential coverage. They also need to have kept this coverage for all 12 months of the 2014 tax year, unless they have a qualifying gap in coverage due to an employment change. Taxpayers who prepare their own return need to be careful not just “check the box” for having minimum essential coverage because the IRS might think they are just trying to avoid the penalty as opposed to just not knowing what qualifies as minimum essential coverage.

Exemptions While some exemptions to having coverage are clear, religious sect or federally recognized Native American tribe, some exemptions are fuzzy at best. You may also qualify for an exemption if you have qualifying financial hardship, received shut off notices, experienced a death of a close family member, or were incarcerated. Much is left up to tax preparer interpretation. For example what qualifies as financial hardship? Who qualifies as a “close” family member? If you claim either of these exemptions, you could qualify for a 3 year exemption from having coverage. On the hand, if a taxpayer gets audited by the IRS, will their reasoning hold up?

Repayment of Subsidies Lost in all the press that ACA has received has been the requirement of taxpayers, who underestimated their earnings for the year, to repay the amount of the subsidy that they were not eligible for when they signed up for their health plan on This could amount to a substantial dollar amount if the taxpayer missed on their estimate or forgot about income that is used in the calculation of the subsidy. Taxpayers could also be eligible for substantial refunds should they overestimate their income for the year.

Please don’t hesitate to contact us at Dusseau & Makris, PC, should you have any questions or concerns.