By Darren Mish
The Affordable Care Act (ACA) requires all U.S. citizens to be covered by health insurance for the entire year. As such, the IRS requires everyone to report information about their health insurance on their tax returns. There is also a penalty imposed on anyone who does not have health insurance, and there are few exceptions to the rule. One exception would be for anyone who qualifies for a tax payment exemption.
The ACA can be quite confusing for many, so there are a number of topics taxpayers should be aware of.
- Who is required to have health insurance?
- Do the tax rules apply if a person already has health insurance?
- How is health insurance reported on tax forms?
- What happens if I can’t afford health insurance?
If you already have insurance coverage through the Department of Veterans Affairs, an employer, Medicare or Medicaid, there’s no need to change anything with your present filings. If you are not covered, check out information provided by HealthCare.gov.
Reporting Health Insurance on the Tax Return
With health insurance, filers only need to check a single box on their 1040-EZ, 1040-A, or 1040 forms that shows there was health coverage for the entire year. Some see both health insurance and taxes as a pain. For 80 percent of Americans, little has changed on their tax returns for the new tax season. On the other hand, it’s good to know where you stand in the matter.
One of the biggest ACA-related challenges with filing taxes is knowing what to do. Here are a few suggestions and reminders.
- If a taxpayer missed at least one full month of insurance coverage for the previous year, they will need to fill out an exemptions form.
- If a taxpayer received advanced tax credits, a premium tax credit form should be filed. Look for a 1095-A form in the mail to help make sense of it all.
- Dependents who carry Medicaid, Medicare or some other insurance should pay special attention to Line 61 of the Form 1040 for the ACA insurance.
In its first five years, the ACA has managed to survive a number of meltdowns. This includes a past presidential election, several challenges in the Supreme Court, and numerous efforts by Congress to repeal it. And now its future is up in the air.
Up until this month, the ACA faced the problem of anemic enrollment. Not everyone who was eligible to purchase coverage did so. A number of markets had trouble enrolling Hispanics and young people who objected to being told they had to buy insurance. And many states were left figuring out how to have their insurance program become self-sustaining. In addition, the penalties for not having medical insurance are subject to rise.
Market stability is also an issue. Insurers are figuring out whether initial premiums are sufficiently able to cover the patients’ medical costs. Then, there is always the political component of the ACA that looms in the background.
Political resistance is also a factor in upcoming ACA concerns. Republicans are zealous to repeal the law. Therefore, with Republicans controlling the White House and Congress, it appears that the pathway is open for changes ahead.
Everything may seem a bit complicated to take in, but taxes and health care are both complex entities. When they overlap, it may take a professional to help figure things out.
Darrin Mish is a tax attorney who has taught dozens of attorneys, certified public accountants and enrolled agents how to help their clients with tax problems. Darrin may be contacted at firstname.lastname@example.org.
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