April 18 is tax day, and many people are wondering whether the new administration plans to enforce the mandate to have health insurance. As most people know, the Affordable Care Act (otherwise known as Obamacare) calls for all taxpayers to have insurance coverage. Those who do not have it must either pay a fine or claim an exemption from the requirement. In addition, those who received Advanced Premium Tax Credits must “reconcile” them on their tax returns. If a consumer has received more of a tax credit than they were entitled to, they must repay it.
On Jan. 20, President Trump signed an executive order giving federal departments the discretion to waive any provision of the Affordable Care Act that might impose a “fiscal burden” on consumers. While the executive order likely does not apply to 2016 tax returns, because departments must still follow rules governing notice and comment periods to change regulations, it’s unclear what will happen for 2017 returns. This will have to be worked out between the Department of Health and Human Services and the IRS. So, for now, here’s what you need to know about health insurance in order to file your taxes this year (for tax year 2016).
People who had health insurance in 2016 will receive a form showing what type of insurance they had. Those forms, known as Forms 1095A, 1095B and 1095C, are similar to a W2 in that they contain important information for a tax filer to reference, but the forms do not have to be submitted to the IRS. Which form someone receives depends on the type of health coverage they have. Some people will receive one, two or all three of these forms, depending on how many different types of coverage they had. If you had insurance all year, you will simply check a box on your tax return to indicate that everyone listed on your return had qualifying coverage for the entire year. Here are some type of coverage:
Union or employer-sponsored health insurance (like the Local 802 plan): Most Americans under the age of 65 receive health insurance through an employer. These people will be provided with a form 1095B or 1095C from their employer. Please note, 1095B and 1095C filers do not need to wait to receive these forms to file.
Medicare, Medicaid or CHIP: More than 30 percent of Americans have health insurance through Medicaid, Medicare, or the Children’s Health Insurance Program. These people will receive form 1095B. People who have Medicaid or CHIP will receive the form from the state agency that oversees Medicaid or CHIP, and people with Medicare will receive the form from Medicare. If you enrolled in Medicaid or CHIP through the New York State of Health web site and you haven’t received your 1095B, call (855) 355-5777. As a reminder, this form is not needed to file your taxes.
Health insurance through the ACA: People enrolled in one of the ACA/Obamacare plans will receive a 1095A form. The form will be sent in the mail and will also be available online through your ACA account (check your inbox). This form contains information that you need to report on your tax return! More on this below. If you have not yet received your 1095A form, contact the exchange from which you received coverage. In New York, call (855) 355-5777.
Special Note: If you received financial assistance or subsidies through your ACA/Obamacare health insurance: Consumers who received Advanced Premium Tax Credits (which lower the cost of your monthly premiums) will see the amount of tax credits they received on their 1095A. This information is necessary to complete Form 8962, which is used to “reconcile” your APTC. Those who received APTCs must reconcile the amount they received (based on their estimated income for the year) with what they were ultimately eligible to received (based on your actual adjusted gross income for the year).
For example, take the example of Mandy. She is a single musician who lives in Astoria. She was enrolled in an Obamacare plan for 12 months. When she signed up for coverage, she thought her income in 2016 would be $28,000, which made her eligible for an APTC of $187/month. But this is the music business, and it’s always hard to estimate your income! When Mandy completes her federal tax return, she realizes her actual income was $24,000. She would have been eligible for an APTC of $237/month. So, she gets a tax credit of $600 to “reconcile” the difference. What if Mandy had estimated her income would be $24,000, but it turned out to be $28,000? In this situation, she would owe the government $600. (However, there are caps on the amount that has to be repaid if your household income is below 400 percent of the federal poverty level). If you live in New York and you think the state made a mistake on your 1095 a form, call (855) 766-7860.
If you did not have health insurance in 2016 and you meet certain criteria, you may be able to file for an exemption from coverage. How you file for an exemption depends upon the type of exemption. Some exemptions can be obtained from healthcare.gov or nystateofhealth.NY.gov. Other exemptions are claimed only when you file your tax return.
Here are the most common types of exemptions in our industry: 1) You went without coverage for less than three consecutive months during the year. 2) Your insurance through your job or union was too expensive. The government defines “too expensive” as costing you more than 8.05 percent of your actual household income. 3) Your gross income is less than the tax filing threshold. 4) You lived in a foreign country for at least 330 full days during any period of 12 consecutive months. There are other exemptions as well; to see the full list, and find out how to apply, visit www.healthcare.gov/health-coverage-exemptions/forms-how-to-apply
If you did not have health insurance, and you are not eligible for an exemption, you have to pay a fine, known as the “individual shared responsibility payment”. The amount varies depending on household size, income, and length of time uninsured. the minimum fine for 2016 is $695 per person.
If you’re having trouble figuring all of this out, there are tax preparers who can help you file your taxes for free. In New York City, visit www.tax.ny.gov/fsa. In other areas, visit www.irs.gov/Individuals/Free-Tax-Return-Preparation-For-You-by-Volunteers.
Renata Marinaro is the national director of health services for the Actors Fund. Reach her at email@example.com.