So the blog posts took a bit of a hiatus during this Open Enrollment season but I wanted to sneak one in before the 2/15 deadline to get health insurance for 2015.
I want to focus on your 2014 tax filing and also use it to highlight the reasons why you want to make sure you have insurance by 2/15. Here are some the scenarios you may encounter when you file your 2014 taxes:
1) There is a new line on your 1040: “The Health Care: Individual Responsibility” line in the “Other Taxes” section. To complete this line, you will receive one of three new tax forms.
- If you got insurance through the Health Insurance Marketplace (healthcare.gov), you will get Form 1095-A.
- If you get insurance on your own with an insurance carrier, you will get Form 1095-B.
- If your employer provides your insurance, you will get Form 1095-C.
One of these forms should have “full year coverage” marked (or a combination of full year coverage between more than one form).
If you did not have insurance for all or part of 2015, you will have to pay a penalty with your 2014 tax return – you will either pay $95 per person or 1% of your gross income, whichever is higher. This will be prorated if you were without coverage for only part of the year.
If you do not have insurance in 2015, this penalty rises to $285/person or 2% of your income, whichever is higher. You need to enroll by 2/15 to avoid this penalty!
Under certain circumstances, you may be exempt from the individual mandate penalties. In this case, you will have to file Form 8965. Reasons for exemption can be found at this IRS site.
2) If you got a subsidy on the Health Insurance Marketplace in 2014, the IRS will be “truing up” your actual 2014 income with the income you used/estimated when you enrolled in the plan and calculated your subsidy.
If your income changed during the year, you should have gone online or called the Marketplace to update your income to cause them to adjust your subsidy accordingly.
If you did not update your income and it is different from your original estimate, you will either:
- Have to pay back some of your subsidies if they were based on an income less than you actually made in 2015.
- Get a tax refund if you ended up making less than you estimated when you applied for subsidies on healthcare.gov.
- This will be determined using your 1095 form and filing Form 8962 with your 1040.
- Luckily, the amount you have to pay back is capped at lower income levels – the payment caps can be found here.
Clearly, I am not an accountant, so I recommend that you get help from your accountant. If you cannot afford an accountant, you can get free help through the Volunteer Income Tax Assistance Program. If you do not qualify for this program and need a referral to a qualified tax accountant, please contact us.