When filing your 2014 tax return, understand the importance of Form 1095-A and Form 8962 as they relate to marketplace-purchased health insurance. — IRS
En español | You might want to get an early start on filing your 2014 tax return this year.
Due to Internal Revenue Service budget cuts, the agency says there will be limited tax preparation help, longer-than-normal customer service wait times for callers and delays in processing paper returns.
IRS Commissioner John Koskinen recently urged taxpayers to use the agency's phone lines only as a last resort.
If you're a do-it-yourself preparer, here's another reason to tackle your tax forms early: New rules related to health care may be confusing for some. For the first time, taxpayers will have to show that they've complied with the Affordable Care Act by checking a box on IRS Form 1040 verifying they had health insurance — such as through their employer, Medicare or the military — or pay a penalty called the shared responsibility payment if they didn't.
Those who purchased insurance through the new health insurance marketplace in 2014 will receive Form 1095-A by mail. This document contains insurance premium costs and other information you'll need to prepare Form 8962, your premium tax credit and reconcilement form. The calculations on your reconcilement determine whether your advance tax credit for enrolling in the marketplace was correct for your income and other factors.
If your actual income was higher than you predicted (if you got a pay raise or took another job with higher earnings in 2014, for example) and you collected a bigger government subsidy than you should have, you'll have to pay back some of it. However, the IRS recently announced that it would waive penalties for making that payment late or for underpayment of estimated taxes throughout 2014.
Taxpayers can request the relief when the IRS sends a notice of penalty. Filers still must pay the taxes within a year or will owe interest if they're not paid by the April 15 deadline for tax returns, says Mark Steber, chief tax officer at Jackson Hewitt Tax Service, based in Parsippany, N.J.
Steber says it may be tempting to skip the IRS reconcilement paperwork that's required if you enrolled through the insurance marketplace. But he cautions filers to resist that urge.
"If you're in the marketplace, [Form 8962] is not something you can leave off or skip or leave it for later," he says. "It will create complications with your tax refund being processed. Do not shortcut this step."
For those who didn't have health insurance coverage last year, you won't have to pay the penalty if:
- The IRS or the exchange granted you an exemption due to financial hardship, religious beliefs or other reasons.
- Your minimum health care premium is more than 8 percent of your household income.
- You have a gap in coverage of less than three months.
The penalty for not being in compliance is the higher of:
- 1 percent of your household income above the tax return threshold for your filing status, or
- A flat dollar amount of $95 per adult and $47.50 per child, to a family maximum of $285.
Next page: Learn about popular tax breaks people can take on their 2014 returns. »
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