How the Affordable Care Act will Affect Individuals and their Tax Return
NEW FORM 1095-B INFORMATION REPORTING FOR THE ACA:
THE TOP 5 THINGS HEALTH INSURERS AND SELF-INSURED PLAN SPONSORS SHOULD KNOW ABOUT THE NEW FORM 1095-B REPORTING REQUIREMENTS ARE:
1. This new IRS reporting on Form 1095-B is optional for 2014, but required for 2015.
As a form of transition relief, IRS Notice 2013-45 announced that for 2014 reporting of minimum essential coverage information is optional. The IRS hopes that health insurers and self-insured plan sponsors will prepare for and attempt reporting for 2014, but they will not be penalized if their first form 1095-B filings to the IRS are for 2015.
The IRS has not yet issued Form 1095-B (the information return for reporting under § 6055) or Form 1094-B (the transmittal form which reports some additional information and is required along with the 1095-B). However, the following information is known about 1095-B reporting:
• Filing deadlines will be the same as for most Forms 1099: due February 28 following the year reported, if filed to the IRS on paper; due March 31 if filed to the IRS electronically.
• Electronic filing is required if the reporting provider or plan sponsor has 250 or more Forms 1095-B to file. Electronic files will follow the existing IRS e-file format described in Publication 1220.
• Form 1095-B statements must be furnished to the “responsible individual” (usually the primary insured individual) by January 31 following the year reported. There is no requirement to send statements to dependents or other individuals who are enrolled in coverage through their relationship to the responsible individual, but information about them will be included in the report.
The information on this page is to give you a brief introduction to how the Affordable Care Act may affect you in regards to your health insurance for 2014 and whether or not you may qualify for help with paying for insurance. It will also list how the Affordable Care Act will affect your 2014 Federal income tax return.
How to Reimburse Employees for Individual Health Insurance Tax-Free
Step 1: Employer Sets up a Formal Reimbursement Plan
The first step is for the employer to set up a self-insured medical reimbursement plan, also called a Healthcare Reimbursement Plan (HRP) or Section 105 Medical Reimbursement Plan. To comply with all applicable rules and regulations (discussed next), the reimbursement plan is structured to reimburse employees for:
ü Health insurance premiums up to a specified monthly healthcare allowance, and
ü Basic preventive health services without cost-sharing.
When the employer sets up the reimbursement plan, they determine monthly healthcare allowances and define which employees are eligible for the plan.
Step 2: Employees Purchase a Health Insurance Plan
The Tax Penalty For Not Having Health Care Coverage
Those persons without health plan coverage must pay a tax penalty to be included on their 2014 tax return if
they do not have appropriate coverage for 2014
• The penalty is paid for each individual that did not have coverage.
• That could include the taxpayer, the taxpayer’s spouse on a joint return, and the dependents claimed on the
The amount of the penalty for any month is equal to the lesser of the monthly national average premium for
bronze level coverage (in 2014, $204 per individual), or 1/12th of the greater of a fl at amount or a percentage
of the individual’s household income. The fl at amount is generally $95 per individual, up to a maximum of three
times that amount ($285) per family. The percentage of household income is 1% of the excess of household
income over the individual’s tax return fi ling threshold. These dollar amounts are phased in and adjusted for
infl ation after 2016.
The $95 penalty amount is phased-in
according to the following schedule:
The 1% penalty amount is phased-in
according to the following schedule:
There is a maximum fl at dollar
amount that may be imposed on a
$95 in 2014 1% for 2014 $285 for 2014
$325 in 2015 2% for 2015 $975 for 2015
$695 in 2016 for the fl at fee amount 2.5% for 2016 $2,085 for 2016
There are several exemptions from the requirement to maintain minimum health coverage including those for
Members of recognized religious sects opposed to accepting health care insurance due to religious beliefs
Members of health care sharing ministries where members share ethical or religious beliefs
Persons not U.S. citizens or U.S. nationals
Indian tribe members
Persons whose income is below the income tax return fi ling threshold
Persons whose premium for self-only coverage exceeds 8% of their household income
The IRS Administers the Penalty
The penalty for not having health care coverages is treated as an additional amount of federal tax owed, however,
IRS enforcement provisions are limited.
• Non-compliance with the requirement to have health coverage is not subject to criminal or civil penalties.
• This penalty may not be collected by the use of liens or other seizures authorized for the collection of taxes.
• No interest on an unpaid penalty will accrue.
The Tax Forms that you’ll need to complete for the 2015 fi ling season include:
• Form 8962: Reconciliation of the Premium Tax Credit
• Form 8965: Exemption from the Affordable Care Act
For more information fi nd answers to the individual shared responsibility provision at http://www.irs.gov/uac/
Beginning in 2014, individuals must have minimum essential coverage, have a coverage exemption, or make a shared responsibility payment with their tax return.
The purpose of Form 8965, Health Coverage Exemption is to report an exemption granted by the Marketplace (also called the Exchange) or to claim a coverage exemption on your tax return. This form will allow you to indicate any month you or another member of your tax household does not have either minimum essential coverage .
Form 8965 can only be attached to Form 1040, 1040A or 1040EZ and there are no fields carried over to the Form 1040, 1040A or 1040EZ.
The Form 8965, Health Coverage Exemption form is optional and there are no system requirements stating that this form MUST be attached; however, if attached, only one form must be attached per tax household.
Health Coverage Exemptions 3