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Key Affordable Care Act Changes for Tax Year 2015

Jan 28th 2016
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Tax year 2015 is shaping up to be another busy year for tax professionals across the country, and keeping up-to-date with the latest Affordable Care Act changes is instrumental in servicing your clients the best way possible.

Below are the most important Affordable Care Act issues that you, your staff, and your clients should be aware of as we navigate through tax season.

This is the second year that Americans are required to report their health insurance status on their tax return under the Affordable Care Act. For most of your clients, it looks like it will be another check-the-box year – meaning they will simply check a box on Form 1040 indicating they had qualifying healthcare coverage for the entire year.

Penalty. The fee for not having health coverage in 2015 increased to $325 per adult ($162.50 per child) or 2 percent of household income above the threshold, whichever is greater. Individuals may be able to claim an exemption.

Form 1095-A, Health Insurance Marketplace Statement(quick recap, no change). Those who purchased a health insurance plan on or a state marketplace will receive Form 1095-A, which confirms coverage, premiums, and subsidies received to help pay for health insurance. This form is needed for accurate filing. If taxpayers underestimate their income and owe a portion of the subsidy back to the IRS, they may be able to reduce their household income and the amount owed by contributing money to a retirement account or health savings account.

Form 1095-B, Health Coverage Statement. This form is distributed to those who have private health insurance, an employer plan, and to those who received government-sponsored health insurance, such as Medicare, Medicaid, or Tricare. The form indicates whether the taxpayer, spouse, and dependents had qualifying health coverage (minimum essential coverage) for some or all months during the year. Individuals with minimum essential coverage are not subject to the individual shared responsibility payment (Affordable Care Act penalty).

Form 1095-C, Employer Provided Health Insurance Offer and Coverage Statement.This form is distributed to those who received health insurance through an employer with 50 or more employees. The form indicates whether the employer offered qualifying health coverage to an employee, spouse, and dependents for some or all months during the year.

Taxpayers don't need to wait for either Form 1095-B or Form 1095-C to file their income tax returns – just advise your clients to check the forms for accuracy if they receive and keep it with their records. Tax preparers can also use other forms of documentation, in lieu of Form 1095-B and Form 1095-C information returns, to prepare tax returns, such as:

  • Insurance cards
  • Explanation of benefits statements
  • W-2 or payroll statements reflecting health insurance deductions

Various elements of the Affordable Care Act apply to small businesses, depending on the number of full-time employees (or equivalents).

Source documents. Employers with fewer than 50 employees need to issue Form 1095-B only if they offer employee insurance that is self-funded. Employers with 50 or more employees need to issue Form 1095-C to report employee coverage.

Small Business Health Options Program. Small businesses can purchase health insurance for their employees through the Small Business Health Options Program (SHOP) Marketplace. Employers with fewer than 25 full-time equivalent employees with average annual wages of less than $50,000 may be eligible for the small business health care tax credit. SHOP enrollees will not receive a Form 1095-A.

Employer shared responsibility provision. The mandate that says employers need to cover their employees with health insurance or face a penalty begins to take effect this year (tax year 2015). The number of employees is determined by considering the average of full-time employees, including full-time equivalents, on business days during the preceding calendar year.

  • Employers with fewer than 50 workers are exempt and not subject to the employer shared responsibility (ESR) rules.
  • Employers with between 50 and 99 full-time employees are liable for the ESR beginning in tax year 2016.
  • Employers with at least 100 full-time employees are liable for the ESR beginning in tax year 2015. There are no new forms planned, and employers can claim relief from an assessable payment on Form 1095-C, if they meet the applicable criteria.

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