Tax Insights

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WARNING – Federal Healthcare Coverage Information May be Incorrect

Last week the Obama administration reported that 800,000 people who signed up for health insurance under the Affordable Care Act received incorrect tax information on the forms they received from the federal exchange and should wait to receive new ones before filing their taxes.

It was reported that roughly 95 % of those who received the erroneous 1095-A forms have yet to file their tax returns. New forms are anticipated to be issued in early March to the impacted taxpayers. Meanwhile, the IRS is considering what to do to remedy the issue for taxpayers who may have used the incorrect information to file their tax returns. The administration indicated that it will provide additional information “shortly.”

Those who have already filed may need to file an amended tax return, possibly resulting in additional tax to pay or less of an anticipated refund, in addition to refunds being delayed.

In connection with these errors, the administration indicated that it would also provide a special enrollment period for taxpayers who were unaware they could face penalties for not having health insurance coverage and for missing the February 15th deadline to obtain health insurance coverage through the federal marketplace at HealthCare.gov.

The one-time special enrollment period will be extended from March 15th to April 30th. If consumers do not sign up for health insurance coverage during this period, they may possibly have to pay an even larger penalty when they file their 2015 taxes. Eligible filers must live in one of the 37 states with a federally facilitated insurance marketplace.

To qualify for the special enrollment, consumers must attest that when they filed their 2014 tax return they paid the penalty for not having health coverage that year and that they first became aware of the implications of not enrolling in a timely manner after they began preparing their 2014 taxes.

The IRS estimated that 2% to 4 % of tax filers, or roughly six million people, may pay a penalty for not having the appropriate health insurance coverage for 2014. The penalty is calculated at $95 per person or 1% of income reported on the tax return. In 2015, the fee increases to $325 per person or 2% of income. Those who enroll during the special period, March 15th to April 30th, will still owe fees for the months they were uninsured in 2014 and 2015. The special period is being offered to allow people to avoid additional penalties for 2015.

If you have questions related to potential penalties or your filing status please contact a CPA for assistance.

By Gary W. Fleming, CPA