It’s hard to believe that the tax return filing season is here. While some of our clients are unable to complete their return until later in the year, others are ready to “get it done” as soon as possible. Regardless of which group you find yourself in, it’s very important to understand the implications of the Affordable Care Act on your tax filing process.
2014 is the first year in which the ACA truly affects the average American’s tax return. That’s because of the necessity of proving compliance with the Individual Mandate, and because of the requirement of reconciling the Premium Tax Credit (for those with who are receiving the benefits of this program).
As one of our clients we obviously don’t expect you to understand everything about the Affordable Care Act. That’s our job! But we do want to get you ready for the new landscape of healthcare and taxes. It’s important to have a general understanding of the requirements in order to be ready to have your return completed by us. In the sections below we review areas related to the ACA that you need to be aware of before having us assist you.
The Affordable Care Act introduces three new forms that many of you received in 2014, and all of you will receive in 2015. The “1095” is distributed by the Marketplace (Exchanges), health insurance comapanies and large employers. These documents are required for the first group in 2014, and optional for the other two. The form will look similar to this:
The 1095 is used to provide health insurance reporting to the federal government. It lists each person who has received coverage. It details the months was in force, and the financial benefit of the policy (or credit). You should expect to receive 1095s from the Health Insurance Marketplace in late January, and from other entities later in the tax season. Unfortunately we expect there will be a lot of variance on when these forms arrive.
It’s very important to understand that you and your family members could receive multiple different forms. Please keep all of these documents and bring them to our office when you meet with your tax advisor.
Health Insurance Related Payment And Account Records
Because of the Affordable Care Act, health insurance and tax compliance have merged into one. As a result you should now make sure to maintain all records related to these topics. You never know what the IRS will want to see! This doesn’t mean you need to retain specific medical information; e.g. details on treatment (at least for tax purposes). But you should definitely start storing:
- All payment records related to medical services or health insurance
- Any documentation received from the Marketplace or Health & Human Services
- Plan information on the specific program(s) in which you are enrolled
- Correspondence from your health insurance regarding any administrative or financial aspect of your account
We recommend that (particularly at first) you err on the side of retaining more documents rather than less. Please place all this information in an ACA folder and bring to our office with the rest of your tax information. It’s important to keep in mind that the ACA requirements are for EVERY family member. So you should have these records for each person who will be included on your tax return.
Complying with the Individual Mandate
All taxpayers will have to certify that they meet the requirements of the Individual Mandate: at least of nine months of coverage with a qualified health plan for all family members. If you have not met this obligation in 2014 you will be required to pay a penalty (or file an exemption; more on that later in this blog). We will help you determine whether you have met this obligation, and try to minimize the amount you will have to pay the IRS.
However we want all clients to understand this requirement in advance. In order to sign your tax return as a “paid preparer” we MUST assess whether you have complied with the law. Some of our clients are “less than enthusiastic” about the ACA. Regardless of your opinion about the legislation it is our responsibility to ensure that we accurately file your return.
We look forward to assisting you with your healthcare tax related needs for this coming season. Don’t hesitate to call our office in advance if you are uncertain about what you must do in order to meet the requirements of the Affordable Care Act.