The IRS has been advising everyone that new Forms 1095 and 8962 are both very difficult and likely to cause many errors. For those that chose to prepare their own returns, this means that your return may be rejected, credits lost and penalties assessed. For those that are having their tax professionals handle their returns, it will mean that the time to prepare the returns will increase substantially, and the cost of the returns will be higher than in prior years.
In 2010, when Congress passed the Affordable Care Act (commonly called Obamacare), the effects seemed far away to many of us. In 2014 there were several direct effects upon every American, with the requirement that all Americans of all ages obtain qualified health insurance for the entire year. The requirement to obtain health insurance applies to you individually as well as to anyone you claim as a dependent on your tax return.
Several new forms have been issued this year related to health insurance, primarily Form 1095-A, B and C. In order to complete your 2014 return, you will need to obtain copies of Form 1095. These forms provide the necessary information to report health insurance coverage, calculate any health care credit and calculate penalties that may apply for not having health insurance.
For the 2014 tax filing season, this is even more complicated because Form 1095 reporting is voluntary, which means you will need to have certain information available in order to complete your return.
Your 2014 tax return requires the following information, which if not provided, will be rejected for e-filing and may cause penalties for filing with incomplete information. At a minimum, you will need the following:
- The name of the health insurance plan you had for the year
- The number of months of coverage
- Members of your family covered by the above health insurance throughout the year
- Your country of residence all year
Of equal importance for 2014 are the multiple possibilities of tax mistakes made primarily by your dependent children who may work in 2014. We recommend that you do not allow any dependent children to file their own returns–seek help from a tax professional.
The IRS also recently released Form 8962 to calculate the health care credit. Not only is the calculation of the credit difficult, but it is very easy to make a mistake and lose the credit.
For those of you who have received an advance payment of the health care credit by purchasing insurance through the Exchange, you may need to repay any amounts received that exceed the computation of the actual credit allowed.