Your tax return will need to indicate for every person who is listed on the tax return, whether or not they are covered by health insurance that meets the standards of the ACA. This includes spouse and dependents who are listed on the tax return. Certain exceptions apply.
Premium Tax Credit
In order to receive the premium tax credit you must have purchased health insurance through the government exchange (aka healthcare.gov). In order to claim the premium tax credit you must report information from Form 1095-A that is issued on or after January 31, 2015. Form 1095-A is only issued by the government exchange. Your return cannot be completed without form 1095-A in order to claim the premium tax credit. Every person listed on a tax return that obtained health insurance through the government exchange will need to have a Form 1095-A.
If you received advanced premiums in 2014 you will have to reconcile the amount of advance premiums that were paid toward your health insurance premiums. If you received too much in advance premiums you will be required to pay the overpayment back with your tax return. If you are due an additional Premium Tax Credit then you receive additional refund or reduction in tax due. The Advanced Premiums were estimated based on your estimated income in 2014. Factors such as actual income reported and the type of health policy you purchased factor into the reconciliation of your actual Premium Tax Credit.
Employer Provided Health Insurance & Penalty Calculation
If your employer offered health insurance coverage and you did not obtain health insurance coverage through your employer due to affordability, you may be able to claim a penalty exemption. In order to claim a penalty exemption you will need to obtain your share of the cost of the employer provided health insurance as if you had accepted employer health coverage. You will need to obtain this information from your employer. See the attached employer questionnaire below that you may use to obtain this information from your employer.
Household income is used to calculate how much premium tax credit you may receive or the penalty you may owe for not obtaining health insurance coverage. The household income calculation can be a rather complex and burdensome calculation. Household income starts with total adjusted gross income from your tax return and adds back certain other non-taxable income items including tax exempt interest, insurance premiums paid through a salary reduction arrangement. For any dependents that you are claiming, you must add their household income to your household income to arrive at total household income for the family for the premium tax credit or tax penalty. For example, If you have dependent children that have part-time jobs, some of this income may need to be added to your household income to arrive at total household income.
Application for Penalty Exemption
If you meet certain qualifications, you may be exempt from the penalty for not having health insurance coverage. Some of these exemptions have to be applied for through the government exchange. If you are approved you will receive an exemption certificate number to be included on your tax return. This process could take six weeks or longer to receive approval for an exemption. There is no deadline to apply for these exemptions. The IRS has indicated that they will accept pending on the tax return as not to delay the tax return filing. At some point the IRS will probably request confirmation from you on your penalty exemption status if you file your return with pending on the exemption status.
Allocation of the Premium Tax Credit
Premium tax credits can be allocated between taxpayers. In situations involving divorce, or dependents claimed by another taxpayer, taxpayers may allocate the premium tax credit anyway they agree to. The taxpayer that receives the form 1095-A is supposed to provide a copy to their ex-spouse. The IRS will be reconciling Form 1095-A amounts to the tax return. The taxpayer who is allocating a share of the premium tax credit will need to indicate the allocation by including the sharing taxpayer's social security number on the tax return.
Tax Healthcare Questionnaire
Below is a form that you may use in getting ready to have your return prepared. This form will help us in determining your healthcare coverages and possible penalty exemptions available.