If you believe the headlines, sorting out the Affordable Care Act (commonly referred to as “Obamacare”) is going to be the single worst moment of your 2015 tax filing season.
That might be true for some taxpayers. But most taxpayers – about 130 million or so – aren’t going to feel any pain at all. That’s because figuring out how to report coverage for those taxpayers who had coverage during the year for purposes of Obamacare isn’t hard. If you had “minimum essential coverage” for all of 2014 and you are not a dependent, you simply check the box on your tax return and move on. There are no calculations to figure and nothing to enter in the dollar column. You’re done.
You’re considered covered if you have insurance through the government, including Medicare, Medicaid, CHIP, retiree coverage, TRICARE, or VA health coverage; private insurance that you purchased on your own including COBRA coverage and coverage obtained through the Health Insurance Marketplace; or provided by your employer (even if you didn’t pay anything for the coverage).
Taxpayers filing a form 1040EZ will see the box at line 11:
Taxpayers filing a form 1040A will see the box at line 38:
And taxpayers filing a regular old form 1040 will see the box at line 61:
If you are a dependent, do not check the box: just move on. You’re all done with this question: leave the dollar column blank and do not need to attach form 8965.
If you are not required to file a tax return, you are considered exempt from the shared responsibility payment and you do not need to file a tax return to claim the coverage exemption. It’s important to remember that failing to file a tax return or owing taxeswon’t disqualify you from obtaining coverage through the exchanges.
If, however, you are required to file a tax return for 2014 (see “Do You Need To File A Tax Return In 2015?“) and you did not have coverage for all of 2014, you need to file form 8965. You’ll use form 8965 to claim an exemption from the shared responsibility payment or to figure the amount of the payment.
Generally, you may qualify for an exemption if:
- You’re uninsured for less than 3 months of the year;
- The lowest-priced coverage available to you would cost more than 8% of your household income;
- You don’t have to file a tax return because your income is too low;
- You’re a member of a federally recognized tribe or eligible for services through an Indian Health Services provider;
- You’re a member of a recognized health care sharing ministry;
- You’re a member of a recognized religious sect with religious objections to insurance, including Social Securityand Medicare;
- You’re incarcerated, and not awaiting the disposition of charges against you; or
- You’re not lawfully present in the U.S.
Hardship exemptions also apply if you meet certain criteria such as if you are homeless, bankrupt, a victim of domestic violence or if you cannot find affordable coverage. For more on hardship exemptions, including how to apply for an exemption,check out the healthcare.gov web site.
If you’ve been granted an exemption, you’ll report that exemption at Part I on form 8965.
If you’re claiming a coverage exemption because your household income or your gross income is below your filing threshold, you’ll report that at Part II on form 8965. Remember that if you don’t have to file a return in the first place, you don’t need to worry about this step (since you’re not filing, right?). It may be the case, however, that you choose to file a return even though you don’t have to – to claim tax credits, for example – in which case, you’ll need to tick this box.
If you’re claiming any other kind of coverage exemption, you’ll report that at Part III on form 8965.
If you don’t qualify for any of the exemptions, use the Shared Responsibility Payment Worksheet (found in the form 8965 instructions) to figure the amount of your payment. For 2014, the shared responsibility payment generally is equivalent to 1% of your income above the “filing threshold” or $95 per adult and $47.50 per child (up to $285 for a family), whichever is higher. Report the amount of the payment on your tax return on the same line where you DIDN’T check the box earlier (to recap, that’s line 61 on form; line 38 on form 1040A; or line 11 on form 1040EZ, as shown above). Attach the completed form 8965 to your tax return.
I’m not going to lie: figuring out that payment isn’t all that easy if you’re doing it by hand. But keep in mind that you ONLY figure the payment if you don’t have coverage, you haven’t been granted an exemption and you aren’t otherwise claiming an exemption. That’s just a handful of taxpayers – so don’t panic ahead of time. It’s highly likely that you won’t even have to deal with it.
If you do have to deal with it, there is some good information on the IRS web site about ACA. You can also head over to healthcare.gov once tax season opens for tools to help you prepare your return.
Source: Kelly Phillips Erb @ Forbes.com