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Accounting and Tax Tips Blog

Beginning January 1, 2014, you are required to have Health Insurance under the Patient Protection and Affordable Care Act (“ACA”).   Under the rules and circumstances of the ACA, if you do not have qualified health insurance for a certain period of time, you will be fined.  Listed below are a few of the top three things you should know when preparing your taxes this year.

1. You will be fined if you don’t have qualified Health Insurance: If you do not have health insurance for a certain period of time in 2014, you will be be fined.  The penalty for not complying with the Affordable Care Act is the greater of the following equations:

– 1% x [Income – Tax Filling Status]; or
– $95 per adult and $47.50 per child, limited to $285 per family, per year.

It is important to note that the amount of your penalty is the greater amount of the two equations above, so being compliant with ACA will help mitigate any additional amount of taxes you owe in Taxes and the minimum amount that you will be fined is $95 is you are single adult.

2. You may be eligible for Tax Credits: If you fulfill certain requirements, you can be eligible for the Premium Tax Credit.  A credit is the most beneficial way to reduce your the amount of taxes that you will be responsible to pay for.  For example, if you make $50,000 a year and after tax expenses and deductions you conclude that you owe $500 in taxes.  A $400 tax credit could reduce the amount of taxes you owe to only $100.  Its important to talk to a competent tax professional to make sure that you’re eligible for this tax credit as it can help you save a substantial amount of money. 

3. Documents to consider for tax filling: There are certain documents specifically pertaining to the new ACA laws that you should be familiar with.  They are outlined below:

Tax Form 1095-A:  Health Insurance Marketplace Statement. This form is an overview that states where you purchased your Health Insurance, whose covered and specific monthly information regarding your monthly premiums and related information.

Tax Form 8965: This is the Health Coverage Exemption form. If you did not purchase Health Insurance but have reasons as to why you did not purchase healthcare coverage, you may be eligible to avoid penalties.  Use this form to determine if you are eligible to avoid penalties for noncompliance with ACA.

Tax Form 8962: Premium Tax Credit Form.  As described in Point 2 above, if you fulfill certain criteria, you may be eligible for a Premium Tax Credit which can reduce the amount of taxes you end up paying.