Wednesday, November 12, 2014

Are YOU ready for the 2014 tax reporting of the ACA?

The individual mandate section of the Affordable Care Act (ACA), or Obamacare, became effective on January 1, 2014.  Essentially, this requires all individuals to have health insurance that meets the requirements of the law, for ALL of 2014.  Certain taxpayers, who meet the income tests and who obtained coverage through the insurance exchange, may have received a premium assistance credit.  Other taxpayers may have ignored the mandate and did not obtain insurance.

The IRS has been charged with the task of enforcing the provisions of the Act.  This means that the information will have to be included on every taxpayers' income tax return for 2014.  This, in turn, will increase the work that is required to prepare even the easiest of returns.  In order to help insure compliance with the law, the IRS has developed several new forms.

The first set of forms is designed to provide information about the period for which the taxpayers, and all dependents, had coverage, and if they received the benefit of a premium assistance credit.  Form 1095-A will be issued by the insurance exchanges to all indivivuals who have obtained coverage through the exchange.  Forms 1095-B and 1095-C will be issued by insurance companies (B) and employers (C).  These forms will provide valuable information necessary to ascertain and report compliance with the law and to calculate the correct amount of credit.  Unfortunately, the forms are not required to be filed until 2016 for the 2015 tax year.  This means that if the Form 1095-B or -C is not voluntarily filed by the insurance company or employer, the the taxpayer will have to provide the information and verificatio from an alternate source.

If you have not obtained insurance through an exchange, you will need to verify that you do have coverage that meets the requirements of Minimum Essential Coverage, or a Bronze Level plan for ALL of 2014 or face the shared responsibility penalty.  If you do have coverage, you need to make sure that you receive verification from the insurance company that it meets the MEC requirements and have verification as to the period of coverage and the fact that it covers all members of the household.  If you have received a premium credit from the exchange, you will need to have the Form 1095-A and details about your total household income.

The bottom line is simply this, it is going to  be a rather tedious task to prepare income tax returns this year.  It is wise to begin planning and gathering the necessary information well in advance to avoid unnecessary delays, expenses and surprises.

If you need additional information or want to discuss this in more detail, please give me a call.

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