The 2014 tax year brings some new changes, thanks to the Affordable Care Act, or ACA.
You may need to answer more questions as you prepare your return, and you may have to pay more – or less – tax based on the provisions of the ACA.
Here’s how the ACA may affect your 2014 tax return, depending on your situation:
Insurance coverage through your employer
If you get health insurance through your employer, you may be one of the lucky ones wondering what all the fuss is about. You may receive the new IRS Form 1095-B, reporting your health insurance coverage, plus Form 1095-C from your employer.
Some employees may not receive these forms for the 2014 tax year. If that’s the case, don’t worry.
Just answer the questions in TaxACT as you prepare your return.
Other health insurance coverage not on an exchange
If you pay for your own ACA-compliant health insurance coverage, or if you are on a government-sponsored program such as Medicare or Medicaid, you’ll get Form 1095-B in the mail and enter the information in TaxACT.
No health insurance
If you didn’t have insurance coverage for all of 2014, you may have to pay a penalty unless you meet an exception.
The amount will be calculated on your tax return, and it may reduce your refund or result in a tax bill.
That penalty is the larger of 1% of your household income in 2014, or $95 per uninsured adult, plus $47.50 for each uninsured child, or up to $285 per family.
Few people should actually pay the penalty this year, however.
First, you only need insurance coverage for nine months of the year to be considered covered. Then, there is a long list of other exceptions.
If your income is too low, if the cheapest coverage you could find would cost more than 8% of your household income, if you’re in jail or not legally in the U.S., or if you claim one of several hardships.
If that’s not enough, there’s one catch-all exception:
You don’t have to pay the penalty if your plan was cancelled and you believe the Marketplace plans are unaffordable, of if you experience any other hardship in obtaining health insurance.
Claiming an exemption from the penalty isn’t as easy as checking a box, however.
To claim an exemption, you must have Form 8965.
For some exemptions, such as the religious objection exemption, you must apply for the exemption through a federal or state exchange. For other exemptions, such as having coverage only nine or 10 months of the year, you can prepare Form 8965 yourself.
Health insurance on a marketplace
Here’s where the ACA is more likely to affect your 2014 tax return.
If you signed up for health insurance through a government-sponsored marketplace, also known as an exchange, you may have received premium tax credits to help pay for your coverage.
The size of the subsidy was based on the income you said you would have in 2014.
Unless you have very predictable income, you probably made more or less money than you expected to.
This may result in a tax liability if you made more money than you anticipated and have to pay back some or all of your premium tax credits, or a tax credit if you made less. Your premium tax credit repayment or additional tax credit are reported on IRS Form 8962.
If you purchased health insurance through an exchange, you should receive Form 1095-A in the mail with information you need to prepare your tax return.
In order to complete IRS Form 8962, you’ll need Form 1095-A.This informational form is also sent to the IRS.
TaxACT reconciles any credit (with the Advanced Premium Tax Credit) you received in advance with your actual income based on answers to simple questions about income and marketplace insurance. You may owe part of the penalty back or be issued a larger refund.