Accountants and bookkeepers are gearing up for yet another tax season. This year marks the first year that the Affordable Care Act’s (ACA) individual shared responsibility provision will be enforced. Are you prepared for the new tax requirements when filing your 2014 federal income tax return?
The individual mandate states that individuals of all ages are required to have at least the minimum essential health coverage. If not, they must either apply for an exemption or pay a penalty for non-compliance. The Internal Revenue Service (IRS) defines minimum essential coverage as follows:
- Government-sponsored programs (including Medicare, Medicaid, CHIP, and TRICARE)
- Employer-sponsored programs (including self-insured plans, COBRA, and retiree coverage)
- Coverage purchased through the Marketplace or individual coverage purchased directly from an insurance company
- Grandfathered health plans
Did you have healthcare insurance in 2014?
If your answer is YES… You either obtained coverage through the Marketplace or another source, such as an employer-sponsored plan, government-sponsored plan, or directly through an insurance company.
If you purchased your health insurance through the Marketplace, you will receive Form 1095-A sometime in early February. This form will provide the names of the insured individuals in your household, and the number of months they were covered. Remember, even if you had coverage for only one day in a month, you will be considered as having coverage for the full month.
If you purchased your health coverage from another source, you won’t receive any new tax forms and will have to check a box stating so on your federal income tax form
If your answer is NO… You may have to pay a penalty for non-compliance. For 2014, the fee is $95 per adult and $47.50 per child under 18 or 1% of your household income over the threshold, whichever is greater. If you don’t have the minimum essential coverage, you may qualify for an exemption on your tax return. Visit www.HealthCare.gov to see if you qualify for hardship exemptions or any other exemptions.
*This article is written for informational purposes only and should not be construed as providing legal advice.