The Patient Protection and Affordable Care Act, also referred to as Obamacare, was originally enacted in 2012 and its effects will begin to be felt more clearly when filing our 2014 income tax returns. This is mainly due to the individual health insurance mandate taking effect in 2014. It is anticipated that confusion may result from the various tax penalties, exemptions, premium tax credits and advance credits that the law entails. There will likely be extra time and fees required to comply with the new law for tax year 2014.
There are basically three new year-end forms for 2014 that come into play: form 1095-A, form 1095-B and form 1095-C. Form 1095-A will be issued to taxpayers for any health insurance coverage obtained through the federal or a state marketplace. Form 1095-B will be issued to taxpayers by insurers for health insurance coverage obtained outside the federal or any state marketplace. Form 1095-C will be issued by certain employers who offer health insurance coverage to their employees. Each 1095 form, when applicable, will report the information needed for the taxpayer to complete their 2014 individual income tax returns. A few new line items will be present on the standard forms 1040, 1040A and 1040EZ. If health coverage was obtained through the federal or a state marketplace, a new 2014 form 8962, Premium Tax Credit (PTC), will also need to be submitted as part of a 2014 form 1040 individual income tax filing. The purpose of form 8962 is to calculate the amount of your premium tax credit (PTC) and to reconcile it with any advance premium tax credit received.
For those that did not fully comply with the individual mandate to obtain health insurance coverage in 2014 and who did not qualify for an exemption, a “shared-responsibility” payment (tax penalty) will be assessed with the filing of your 2014 income tax return. For 2014, the penalty is the larger of either $95 per adult and $47.50 per child (up to $285 per family) or 1% of household income. For 2015, the penalty will be the larger of $325 per adult and $162.50 per child (up to $975 per family) or 2% of household income. For 2016, the penalty will be the larger of $695 per adult and $347.50 per child (up to $2,085 per family) or 2.5% of household income. It is important to note that these shared-responsibility penalties are not enforceable by the IRS which means that they will offset the payment against tax refunds due, but they can’t file liens, levy assets or start collection proceedings related to this penalty.
Whether or not you personally agree with these new regulations, they are the current law and we are ready to prepare your tax returns in compliance with them. Speaking of which, tax season is just around the corner – the IRS begins accepting electronic tax returns next week on January 20th. We look forward to working with our clients once again this year. If you are not a current client of Weech Financial, we would love the opportunity to provide services to you now or in the near future.
Please contact us with any questions and to schedule your 2014 tax appointment, if needed.