The Affordable Care Act: How it Affects Your 2014 Tax Reporting



Starting on January 1, 2014, most Americans were required to obtain “minimum essential health care coverage” (Medicare, Medicaid, TRICARE, CHIP, Veteran’s Health, Employer Sponsored Plans, or at least a Bronze level plan as defined in the Exchange plan options). Those who did not cover themselves or their dependents claimed on their tax returns this year will most likely incur a penalty, also known as the “shared responsibility payment”.  



The penalty for not having coverage is calculated on a month-by-month basis. It is calculated and paid via your annual income tax return. Some may have heard that the penalty is “only $95” for the year. This may be true… but it may be MUCH worse: 

  • 2014: $95 per adult, $47 per child, OR 1.0% of family income, whichever is greater.
  • 2015: $325 per adult, $162 per child, OR 2% of family income, whichever is greater.
  • 2016: $695 per adult, $348 per child, OR 2.5% of family income, whichever is greater.



You are only able to purchase insurance through the exchanges during the annual open enrollment period, November 15, 2014, through February 15, 2015, or for 60 days after a “Qualifying Life Event” (marriage, child birth, job change, etc).



An insurance exchange is a state or federally-run insurance store that acts as a middleman for insurers and consumers.  The exchanges establish certain requirements and guidelines for four different policy types of insurance (Bronze, Silver, Gold or Platinum… or similar designations), and insurers then submit policies to the exchanges for approval and classification.



  • Religious conscience (opposed to accepting insurance benefits)
  • Not required to file a tax return
  • Short coverage gap of less than three months
  • Unaffordable coverage options (based on income level and premium costs)
  • “Hardships” (things like homelessness, bankruptcy, eviction, foreclosure, death of a close family member, human or natural disasters, and a few others) 

To qualify, you must obtain an exemption from either the Marketplace (exchange) or the IRS.



Form 1095-A: If you get insurance through any federal or state health insurance exchange, you should receive this form from the exchange by January 31, 2015. We will require this tax form before we prepare a tax return, and before any related tax credits can be obtained.  We will be asking every client if they received one, and our Organizer Questionnaire will do the same.

Form 1095-B: This form will be from an insurance company and will report proof of minimum essential coverage so covered taxpayers can avoid a penalty. However, this form is optional for the 2014 tax year, so many taxpayers won’t see one. This means we will need to rely on written information from taxpayers… requiring a signed statement of coverage so we cover our responsibility to report properly. This form should be much more common by the 2015 filing season.

Form 1095-C:  This form will be from employers to show employees’ proof of coverage. Again, this form is optional for 2014, except employers with over 250 employees, which MUST file it this year. Hence, we need to receive this form if our clients receive it. Otherwise, we will require written statements by the taxpayer to report coverage properly.



This tax form only applies to those who obtained health insurance through an exchange. It calculates any premium tax credit based on your actual reported 2014 income, and compares it to anticipated income when the exchange application was filed over a year prior. Any differences are either a tax due (underestimated income at the application process) or a tax refund (overestimated income at the application process).  Form 1095-A from the exchange is REQUIRED to complete this form.

There is a good chance that someone could have (honestly) underestimated their 2014 income when they applied for coverage at an exchange one year ago.  This could lead to a tax liability, basically having to “pay back” those prepaid tax credits (which were in the form of premium discounts).  



This worksheet reports any penalties (shared responsibility payments) from not having minimum essential health coverage. Completion of this worksheet involves pulling information from various sources, will require numerous inquiries or reports to review… and may take well over an hour to prepare. Preparing this tax form, if necessary, is why many tax prep chains are talking about large fee increases. Sadly, it is often the taxpayers who can least afford additional fees that will need this additional filing requirement. 



Due to the additional time involved in this entire process of ACA education, data gathering, reporting, filing accurate tax returns, and hiring additional staff, we may find it necessary to raise our fees a nominal amount this tax season. Those who obtained health insurance through the exchanges, or who did not have coverage for a portion of the year, may see more sizable increases due to the complex reporting requirements.  


** Please note: specific questions about your health care coverage should be directed to your benefits administrator.


At tax time, be prepared to supply the following information or documents:

  1. Form 1095A, B, or C (treat this form just like a W2 or 1099 form… we must have it).
  2. A listing of each person claimed on your tax return, and whether or not they had health insurance coverage, what company or government program it was through and, if not covered for any portion of the year, which months they were not covered. We will supply a worksheet for this purpose with our tax organizer packet. This will be necessary from all clients.
  3. Be ready to have extra patience with the additional questions you have never been asked before by your tax preparer, as we work through this first year of ACA reporting.

If you get insurance through an exchange, take the time to understand how the Premium Reduction Credits and Premium Tax Credits work so you can avoid tax return surprises.