We had to have this talk sooner or later.
Tax-filing time is around the corner, and this season will be the first in which the Affordable Care Act figures heavily.
To that end, the Internal Revenue Service has a new, 21-page publication on what taxpayers need to know as they get ready to file this spring.
Before you begin scanning your insurance policy to see whether you’re covered for a big jump in return-related stress, we have a few simple tips.
First, the law does require you to have carried “minimum essential” coverage for at least nine months in 2014. What coverage qualifies? Medicare, Medicaid, group policies through an employer and individual plans bought through a state insurance exchange. If you’re still not sure whether your plan counts, the IRS has a chart to guide you at irs.gov/aca.
If you bought through the state’s Nevada Health Link exchange, then Xerox, the company that built the website, will be sending you Form 1095-A, which verifies that you bought a plan. You’ll need the form to do your taxes. If you’re covered through your employer, the company should state that you have a plan on your W-2 form.
So what if you didn’t follow the federal coverage mandate and buy a policy in 2014?
You face a tax of $95 if you’re single or up to $285 for a household of two or more, or 1 percent of your income — whichever is greater.
Now, about that mandate: There are exceptions to the rule, but you’ll need to fill out IRS Form 8965 to prove you’re cleared to go without coverage.
If plans available through work or the state’s Nevada Health Link exchange would equal more than 8 percent of your household income for the year, you won’t be taxed.
Nor are noncitizens, even ones who are here legally, subject to the levy. Members of Indian tribes are exempt, as are members of health care-sharing ministries and people who were in jail or prison in the year.
Also, if you’re a member of a religious sect that conscientiously objects to accepting any insurance benefits, you’re off the hook. Before you make up a group akin to George Costanza’s Human Fund on “Seinfeld,” keep these guidelines in mind: Your sect needs to have existed at least since 1950, and it has to be recognized as a conscientious objector by the Social Security Administration. You also need to forswear Medicare and Social Security benefits.
Hardship exemptions are available for consumers who experienced homelessness, eviction, foreclosure, domestic violence, death of a close family member or unpaid medical bills. Also, if you lost coverage but “consider other plans available unaffordable,” you could opt out.
So: If you’re one of the three or so Americans left who will owe a noncoverage tax, you’ll need to check out IRS Publication 5185. The tax will come out of your refund, if you’re getting one. For political reasons, Congress withheld the usual collections leverage, such as liens, from the IRS. If you’re not receiving cash back this season, you’re supposed to pay the tax when you file your return. If you don’t, the IRS will carry over the tax until you do see a refund. The agency can’t do any enforcement beyond that.
The flip side to the tax is a tax credit.
If you made less than 400 percent of the 2014 federal poverty wage — $45,960 for an individual; $94,200 for a family of four — you could receive a federal subsidy to help pay your premiums. You’re eligible for the credit only if you bought through Nevada Health Link or federal healthcare.gov. It’s important to know that if you received a bigger credit than your income entitled you to, you’ll have to pay back the excess subsidy with this year’s return. By the same token, if you were shorted on your premium tax credit, you’ll get a bigger refund to make up the difference.
To help understand your potential tax credit, complete IRS Form 8962.
Like any federal tax topic, this one is complex. We’ve scratched the surface to help you understand whether you’re even subject to taxes or tax credits under the law. If your situation is complicated, or we haven’t answered your questions here, chat with a tax professional or see the IRS’ ACA publication at www.irs.gov/pub/irs-pdf/p5187.pdf.
-Nevada’s biggest insurance-enrollment navigator group has a new resource for consumers seeking coverage.
Ramirez Group of Las Vegas has launched the website ramirezgroup.com/nhl, where consumers can get basics on required enrollment paperwork, find an enrollment assister and calculate potential premiums and subsidies. There’s also a list of upcoming sign-up fairs. Visitors to the site can also find links to the five carriers offering coverage through the state’s Nevada Health Link exchange, and determine whether they’re eligible for coverage through the state marketplace or Medicaid.
Open enrollment in coverage runs through Feb. 15.