PEMBROKE PARK, Fla. - While conversations about the Affordable Care Act, also known as "Obamacare," have been primarily centered on questions concerning enrollment and coverage, it also signifies one of the most significant changes to the tax code.
Millions of Americans may be shocked to learn that they could face a fine for not having health coverage for more than three months or perhaps be stuck with a tax bill if they signed up for coverage through HealthCare.gov and made more money in 2014 than they counted on.
Mike Dobzynski, Internal Revenue Service spokesman for Florida, said for most the process will be simple.
"The vast majority of taxpayers, however, will only have to check a box on their return," he said. "You need to let us know you have coverage and whether or not you're exempt."
Individual Mandate: "The Penalty"
For the first time, those who did not have insurance coverage for more than three months will be penalized.
"They may be liable to what we call the Individual Responsibility Payment on the tax return," Dobzynski said. "We expect somewhere in the neighborhood of 6 to 8 million taxpayers may fall into that category."
Florida state director for Enroll America, Nick Duran, said the penalties vary depending on income and household.
"This first year (that) 2014 is $95 for a single individual, $285 for a family or 1 percent of your income above the income tax threshold, which is about $22,000 for a family," Duran said.
However, individuals without insurance can apply for certain exemptions.
"(If) you had bankruptcy, went into bankruptcy in 2014, or somebody in your immediate family had died," Duran said of being exempt.
But those who have insurance coverage may also owe money to the government if they enrolled through Obamacare and received a premium tax credit to help make their plan more affordable.
According to the Department of Health and Human Services, more than 1.3 million Floridians are signed up for coverage through the marketplace and 93 percent of those individuals qualify for financial assistance
"With just six days left before the Feb. 15 deadline and the end of this year's open enrollment, millions of Americans already are counting on the financial assistance the Affordable Care Act provides to put quality, affordable health insurance coverage within reach," HHS Secretary Sylvia M. Burwell said. "Consumers who sign up in Florida are saving $297 a month on their premiums on average, and in the 37 states using HealthCare.gov, nearly eight in 10 could select a plan with a premium of $100 or less with tax credits."
The premium tax credits are based on estimated income and family size.
"This year is the first time that they are going to (be) reconciling what that actual income is," Duran said. "And so they will figure out whether they actually made more or less of that estimated income."
Duran said these credits could impact your tax return in one of two ways.
"Folks are going to show up and say, 'Oh, I actually made much less than what I actually estimated,' when they purchased the coverage and they are actually going to receive more in their refund when they file those taxes," he said. "Someone might actually have made more money, and they should not have received that financial assistance, and so they are going to probably end up having to pay back that financial assistance."
A University of California, Berkeley study conducted by Dave Graham-Squire shows the possible consequences of receiving this financial assistance.
"The greatest risk for owing subsidy repayments is faced by families whose incomes increase just enough to put their annual income over 400 percent of poverty," Graham-Squire said. "For example, if a family of four with two working spouses over age 55 received a year-end bonus, that puts the family income just over 400 percent of poverty. The spouses could be required to repay as much as $11,200, or 12 percent of the family's annual income."
According to Dobzynski, those who did purchase their health insurance through the marketplace will be required to fill out extra paperwork when filing their taxes.
"There is a form that they are going to have to have to file their returns. It's called a 1095A," he said. "People covered through the marketplace may be able to access those online."
While the additions to the tax-filing process may seem confusing, getting answers from the IRS may be difficult. Dobzynski said a cut in resources may affect the support staff.
"The best way to communicate with the IRS is to go to our website, IRS.gov," he said. "Getting through on the telephone is going to be a little tough."
Click the links below for:
- Four Tax Facts about the Health Care Law for Individuals
- Affordable Care Act Tax Provisions (Individuals and Employers)
- Turbo Tax Free Tool: Exemption Check
- List of Exemptions
- Health Coverage and Tax Returns
- Form 1095-A
- Form 1095-B
- Form 1095-C
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