New Health Care Provisions Impact Tax ReturnsApril 13, 2015
By Tom Krywinski
Tax Day on April 15 is fast approaching, and both business and individual filers across the state should be busy preparing their returns in anticipation of the looming deadline. As this is done, filers need to be mindful of one of the most significant pieces of legislation to be signed into law in the past decade — the Affordable Care Act, known colloquially as Obamacare — and the tax implications that exist this year that need to be considered. These include new forms to be filed as well as penalties businesses and individuals face for failing to comply with the ACA.
For businesses and employers, this could be the year when requirements begin to take effect and will have an impact on what they file. While the employer mandate — which required businesses of certain sizes to ensure health insurance coverage options for their employees — was postponed from a year ago, businesses with 100 full-time employees or more must be in compliance by Jan. 1 of this year, and their tax filings must reflect this. For businesses with between 50 and 99 employees, the deadline has been delayed until Jan. 1, 2016, while businesses with fewer than 50 employees remain exempt. Full-time employees are now defined as people who work 30 hours a week or more.
Those employers that are now required to meet the employer mandates need to be aware of penalties attached to failing to comply. If no coverage is being provided in companies with more than 100 full-time employees, a penalty of $2,000 per employee will be assessed. And if that coverage does not meet the essential terms established by the ACA, a penalty of $3,000 will be levied for every full-time employee who goes to the health care exchange marketplace and receives subsidized health care coverage.
For individuals who have taken advantage of the ACA this year, there are also requirements that must be met. For starters it is estimated that 6 million people nationally continued to go without coverage in 2014. Failure to have coverage now results in a penalty of either one percent of income, or $95 per adult and $47.50 per child, whichever amount is greater, with a maximum penalty of $285.
All 1040 tax forms now have a new line (Line 61) inquiring about health care coverage.
If a person had health coverage provided (through work, Medicare, Medicaid or other areas) in 2014, the person simply needs to check the box that indicates coverage.
If a person had no coverage, that person needs to fill out Form 8965 to see if an exemption applies, such as an income level below filing threshold, coverage that is considered affordable (with premiums greater than 8 percent of household income), gap coverage (no health coverage for fewer than three consecutive months) or if that person lived abroad for 330 days. General hardships are also taken into consideration as a valid reason for no health coverage.
For those who now have coverage through the health exchange, there is an entirely new form that needs to be completed, called Form 1095-A. For those who are seeking a premium tax credit, Form 8962 needs to be completed to determine qualifications. If eligible, people can choose to have the credit paid directly to the insurance company to reduce premiums.
Additionally, if someone has enrolled through the health exchange marketplace and received advanced premium credit, that person must file Form 8962 to reconcile the amount of that tax credit. If too much of a credit was taken out, it needs to be repaid.
Clearly the ACA has changed the nation’s landscape in terms of health care, and it is now incumbent upon both business and individuals to be aware of these changes and to comply with the law. There is still time to consider these factors before filing in 2015.
Thomas Krywinski is a tax partner in BlumShapiro’s Shelton office. Contact him at 203-944-8723.
Disclaimer: Any written tax content, comments, or advice contained in this article is limited to the matters specifically set forth herein. Such content, comments, or advice may be based on tax statues, regulations, and administrative and judicial interpretations thereof and we have no obligation to update any content, comments or advice for retroactive or prospective changes to such authorities. This communication is not intended to address the potential application of penalties and interest, for which the taxpayer is responsible, that may be imposed for non-compliance with tax law.