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IRS News: ACA Changes to 2014 Income Tax Filing

September 30, 2014  |   Tax News   |   Tags: , ,  

In recent IRS news, IRS Commissioner John Koskinen recently revealed that three new forms have been drafted for the 2014 income tax filing season. All of these forms relate to the Affordable Care Act, better known by many as Obamacare or ACA, that was enacted this year and they apply to many taxpayers.

Form 8962 Premium Tax Credit and 1095-A Health Insurance Marketplace Statement go hand in hand. Form 8962 will be necessary for all of those taking advantage of the Premium Tax Credit. In order to qualify for this credit, a taxpayer must have purchased insurance through the Health Insurance Marketplace associated with ACA and meet other qualifications. Like many IRS tax forms, Form 8962 has its own instruction manual to help taxpayers avoid making the usual errors. The 1095-A Health Insurance Marketplace Statement is the instructional manual for the Form 8962.

Not every taxpayer has purchased insurance through the Health Insurance Marketplace. So, not everyone will be required to fill out the Form 8962. For many, this is because they already have insurance through their employer. They will not be required to fill out any new forms related to the Affordable Care Act. However, there are many taxpayers that have no kind of insurance coverage or family members that have no insurance coverage and they may be required to either turn in a shared responsibility payment with their income tax return or request an exemption.

The amount someone owes with the shared responsibility payment varies greatly. The IRS requires taxpayers to pay either 1% of their annual income or $95 per adult ($47.50 per child) in your family, whichever is higher, with a cap at $285. With every passing tax year, this shared responsibility payment dramatically increases. By 2016, this payment will be the highest between 2.5% of a taxpayer’s income or $695 per family member. Currently, if a taxpayer’s annual income is less than $10,150, they will not need to worry about paying any of this.

Many taxpayers who have no kind of insurance coverage were unable to obtain any because of circumstances out of their control. For these people, the Form 8965 Health Coverage Exemptions can help them avoid having to send in the shared responsibility payment. Acceptable reasons that could exempt a taxpayer without insurance coverage from the shared responsibility payment ranges from general hardship to true religious conflict. As usual, burden of proof lies on the taxpayer when it comes to claiming exemption from this payment.

For those who need help from IRS customer service to understand these new forms, the long hold times caused by IRS budget cuts over the last few years may be daunting. Fortunately, IRS Commissioner John Koskinen has also stated that he will be pushing for an increase in budget to hire more phone service employees and hopefully answer 12 million more taxpayer calls during the income tax filing season.