DIVERSIFIED TAX TIDBITS by Mark A. Burns
On your 2014 tax return, for the first time, you will see the implications of The Affordable Care Act (Obamacare). The degree to which you may be affected depends on your specific situation.
First of all, if you have health insurance through your employer, in most cases you will just check off a box indicating you have coverage. That is all you have to do, and there are no further implications.
Second, if you did not have “minimum essential coverage” for the entire year but satisfy one of the almost 20 exemptions, then you have to indicate which exemption you qualify for on Form 8965 and you are done.
On the other hand, if you did not the have the “minimum essential coverage” throughout 2014 and do not meet any of the exemptions, you will owe a penalty (in government language, your “shared responsibility payment”). That penalty can range from as low as $95 up to almost 1 percent of your income. This penalty will show up on line 61 of your Form 1040.
The final issue to be considered is the Premium Tax Credit (PTC). If you obtained health insurance on one of the exchanges (e.g., Access Health CT), at the time of sign-up you were given an option of either paying the full monthly premiums during the year, or seeing if you qualified for a “subsidy” (i.e., reduced monthly premiums) based on your income. So, if you wanted the reduced monthly premiums (which most people preferred), then you provided an estimate of your 2014 income and a calculation was done to see if you were eligible for such a reduction.
However, those calculations were based on estimated income. Now you must include Form 8962 with your 2014 tax return to reflect the final numbers. If your actual income ended up being higher than your estimate, there could be an unfavorable adjustment on your tax return, and you could either owe some additional taxes for 2014 or get a smaller refund than expected. On the other hand, if your actual income ended up being lower than estimated, you could have an adjustment in your favor.
Also, if you did not choose to have your monthly premiums reduced for any subsidy, then any PTC for which you are eligible can be claimed fully on your 2014 tax return.
If you obtained your insurance through one of the exchanges, you already should have received Form 1095-A, which will provide the information required to perform the necessary calculations on your tax return.
The above is a very broad discussion of this topic. Make sure you consider all issues on your tax return – whether you prepare your own tax return or if you use a professional tax preparer.
Mark A. Burns, MBA is a CPA with Diversified Financial Solutions PC in Southbury. He can be reached at 203-264-3131 or Mark@DFSPC.biz.
