Tax Year 2015 Changes to the Individual Provisions of the Affordable Care Act

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The tax provisions of the Affordable Care Act associated with individual taxpayers were implemented last year, in tax year 2014. Consequently, this year, in tax year 2015, we only need to deal with some adjustments to the legislation.

Here is a chart that shows the impact of the various elements of ACA from last year:

Individual Shared Responsibility Payment

The Individual Shared Responsibility Payment applies for any given month that either the taxpayer, spouse or dependents don’t have qualified coverage or an exemption.

The penalty is calculated at the greater of:

  • A percentage of household income above the filing threshold, or
  • A flat dollar amount

The penalty is being phased in under the following schedule:

The overall cap on the penalty is the National Average Bronze Plan Premium, and it works out to be $207 per individual per month. The IRS has made some adjustments to the worksheet in the draft version of the Form 8965 instructions, but the computation has not changed.

Coverage Exemptions

The following chart of Coverage Exemptions is taken from the Form 8965 draft instructions. The exemptions have not changed from last year, with the exception of the following:

  • For coverage considered unaffordable (2nd item below), 8 percent of household income has increased to 8.05 percent.
  • Member of tax household born, adopted or died (10th item below) has been added to the chart. However, the exemption did exist last year.
  • Certain Medicaid programs that are not minimum essential coverage (last item below) has changed from last year.

Premium Tax Credit

According to the draft instructions for Form 8962, there are not many changes to the Premium Tax Credit for tax year 2015. The 2014 federal poverty levels used in tax year 2015 have been indexed for inflation. Taxpayers falling within 100 percent and 400 percent of the federal poverty level may be eligible for Premium Tax Credit.

King v. Burwell

Under the Affordable Care Act, people go to the Marketplace to purchase health insurance and receive subsidies from the government. On June 25, 2015, the United States Supreme Court held that ACA subsidies are available to people buying insurance from federal exchanges, in addition to state exchanges. Prior to the ruling, there was a disagreement in the interpretation of the statute about whether subsidies were available to people who purchase insurance on federal exchanges. The Internal Revenue Service had been operating under the assumption that the Supreme Court would rule this way. Consequently, there will be not changes to the implementation of the law.

Source Documents

The following source documents will be used to support ACA computations starting in tax year 2015:

  • Form 1095-B, Health Coverage Statement, is issued by providers of minimum essential coverage, including self-insured employers.
  • Form 1095-C, Employer-Provided Health Coverage Statement, is issued by large employers with more than 50 employees.

There are no changes to Form 1095-A, which was issued by health insurance exchanges and was rolled out in tax year 2014.

In a continued effort to streamline the health insurance reporting requirement under ACA, taxpayers who have non-Marketplace health insurance will receive the new Form 1095-B and 1095-C, from large employers and, in many cases, their health insurance carrier, but will not have to attach or enter information from the forms on their 2015 tax returns filed in 2016. This means that if you had non-Marketplace health insurance during the 2015 tax year, these new forms will be for informational purposes only and you’re not required to send in proof of health care coverage to the IRS. However, you should keep these documents with your other records. Other documentation serving as proof of coverage includes insurance cards, explanation of benefits’ statements from your insurer, and W-2 or payroll statements reflecting health insurance deductions.

If you changed jobs or your benefit plan during the year, or added or dropped dependents from your coverage, you should verify that the forms indicate you and any dependents you claim had coverage for the entire year, or make a note about any gaps in coverage that occurred. Be sure to check the forms for accuracy. When you receive both of these documents, Form 1095-B from a provider and Form 1095-C from a large employer, you may be confused, but the information on these documents should be consistent.

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