Under Obamacare, the taxman’s coming for more of us

As you prepare your 2014 personal income taxes, beware of the ACA penalties


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The Affordable Care Act (aka Obamacare) has provided health care to millions of Americans that might not otherwise have it. Although most might see this as a good thing, the question always comes up about who is going to pay for it –

the government, the insurance companies, the insured or the taxpayers.

Until now, the only ones who contributed have been medical device manufacturers and the fortunate 1 percent. Since 2013, the medical device excise tax has been levied against companies manufacturing and selling these products.

High-income taxpayers joined in the fun by paying an additional 0.09 percent Medicare tax on wages over $250,000. In addition, if a high-income couple had modified adjusted gross income exceeding $250,000, they ended up paying an additional 3.8 percent Medicare tax on the amount of their net investment income that exceeded that threshold.

Soon, employers who don’t provide health insurance coverage to their employees will begin to be penalized.

The other 99 percent have not yet had to pony up anything, but that is about to change.

Starting in 2014, every person who files an income tax return will be required to answer questions regarding their personal health care coverage. If you and your household members had adequate coverage supplied by your employer or a government program, check the box on Line 61 of Form 1040 and be on your merry way. For those who either purchased health coverage through these newly established exchanges or did not maintain minimum essential coverage for at least nine months, you will need to stay tuned.

If you filled out the six-page application on healthcare.gov and received your exemption certificate, you will need to file Form 8965 to record the exemption. Then you can join the others with adequate coverage in the happy line.

If neither of those situations describes your circumstance, get out a pencil and some scratch paper, because you are going to need it.

Find a preparer

IRS Form 8962 has been created to capture information regarding your coverage, or lack thereof, and how it was paid for.

If you paid a reduced premium through the exchange, you may receive an unwanted surprise. Since the assistance you received was based on estimated household income, you now have to reconcile this estimate with actual income. If your income was underestimated, you may have to repay the excess. The key words are “may have to.”

If for some reason you and/or someone in your household failed to obtain minimum essential health care coverage for at least nine months of the year, you may also be assessed a penalty.

If you and/or someone in your household did not have minimum essential coverage, you may have to pay the greater of a $95-per-person penalty with a total penalty of $285 per household or 1 percent of household income.

These amounts are divided by 12 months and times the number of months without minimum essential coverage. While this might not look very scary, this will grow to $695 per person, $2,085 per household or 2.5 percent of household income, by 2016.

Keep in mind, again, the key words are “may have to.”

Currently, there are exceptions for religious reasons, hardship reasons, domestic violence, death of a close family member, being incarcerated, or even if you are an alien (from another country, not another planet). I would try to list them all, but I’m only allowed so many words in this article.

What do you need to do?

If you have received a Form 1095-A Health Insurance Marketplace Statement, you will need to provide this form to your tax preparer. If you don’t have a Form 1095-A, but have an exemption certificate, you should provide that instead.

(Further complicating things, about 800,000 Obamacare enrollees have found out they received incorrect subsidy information on the 1095-A tax forms. They have been told they will have to hold off on filing their taxes.)

These documents should provide the necessary information to determine whether you will receive a credit, a penalty or have been exempted. If you received a premium credit offset (reduced premium payment), the tax preparer will have to reconcile your estimated income to actual income to determine if partial repayment is required.

If you don’t have either document and didn’t have minimum essential coverage for at least nine months, you will have to compute your penalty or find an exception that fits.

If you don’t have a tax preparer, I would seriously start looking for one. As with so many things in life, there is no such thing as a free lunch and affordable care is no exception (pun intended).

Steven F. St. Pierre is a CPA, and a financial advisor with LPL Financial in Manchester. He can be reached at 603-669-1999 or info@FinancialAdvisorNH.com. 

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