Obamacare, aka the Affordable Care Act (ACA) has already proven to have been sold to the American electorate based on falsehoods, to be massively complex, and not to be affordable to either the middle class or those who have been granted subsidies.
Now comes the 2015 tax-filing season, and a new set of costs on top of all the others.
Beginning with your 2014 tax returns, every taxpayer and tax preparer will need to become health insurance savvy as every taxpayer needs to be evaluated as to:
(a) Are they required to have health insurance (the “individual mandate”)?
(b) If required to do so, did they have health insurance (either through an employer, through the exchange, or through an individual policy)?
(c) Did the insurance meet the minimum requirements for coverage?
(d) Were all family members (typically includes children under 18) covered?
(e) If purchased through an exchange/marketplace, were they entitled to a premium credit; did they receive a premium credit; and if so, how much?
You will need the answers to those questions if you are going to be able to fill in the below boxes on the revised form 1040! Pay special attention to line 29, 38, and 45.
Line 29 – if the taxpayer purchased insurance through an exchange and received a subsidy (premium credit) that was GREATER than what they were entitled to, then the EXCESS (repayment) of the credit received over the allowable credit will be recorded here and added to their other taxes.
Line 38 – this is where we will have to record the PENALTY the taxpayer will pay if they were NOT exempt from having insurance, and (a) they had no coverage for part of or the entire tax year, or (b) had substandard coverage (a policy that did not meet the minimum requirements for coverage).
Line 45 – if they either received NO subsidy, or their subsidy (that was based upon their 2012 income via the exchange) was LESS than they were entitled to, then they would have a CREDIT here for the difference between their allowable subsidy and what they actually received.
Now in order to fill in those three blanks, you will almost certainly need to fill in proposed form 8962. The schedule will need to be filled out by every taxpayer who purchased insurance through an exchange, and (a) received a subsidy, or (b) is eligible for a premium tax credit! It would be fair to say that the individuals who are most likely to need this form or those least likely to understand how to fill it out.
That means the folks are going to need their tax preparer to fill it out. Assuming that tax preparers are still desiring to make a profit from helping taxpayers fill out their tax returns, the cost of filling out additional forms will result in higher costs to the taxpayer.
Remember that the marketplace formula for calculating the advance premium credit uses the 2012 income of the taxpayer in determining their credit. If their income in 2014 was HIGHER than 2012, then most likely they received an excessive credit toward their premium – and it will be payback time on the 2014 return!
Here is the draft form 8962. Remember – it is ONLY required if insurance was purchased through the marketplace – period!
Any employer plan or individual plan has no credit applicability.
HOWEVER, a penalty (individual mandate) MAY still be required if the employer’s insurance was sub-standard (not up to par with the least costly Obamacare plan) or coverage was not in place for the full year, or some family members were not covered (who had to be covered under the rules).
None of the above takes into consideration the rules for businesses, corporations, non-profits, and tax exempt organizations, and costs they must pay their tax preparers to insure compliance with the new rules and/or pay various fines for failure to comply.
If you are having difficulty with your 2014 tax return, and would like help understanding all the latest changes, the tax preparation division of Demetriou, Montano & Associates stands ready to help. Call 888-987-1040 and discuss your needs with us today.