The Affordable Care Act includes
financial assistance in the form of the premium tax credit for eligible
taxpayers with moderate incomes who purchase coverage through the Health
Insurance Marketplace.
When you purchased coverage for 2014
through the Marketplace, you may have chosen to have the government send
advance payments of the premium tax credit to your insurer to lower your
monthly insurance premiums. At that time, the Marketplace estimated these
credits based on information you provided about your expected household income
and family size for the year.
If you chose to have advance credit
payments sent to your insurer, you must file a federal income tax return, even
if otherwise not required to file. You will need to reconcile these payments
with the amount of premium tax credit you’re eligible for on your tax return.
Receiving too much or too little in advance can affect your refund or balance
due when you file.
For example, if you had certain life
changes during the year and notified the Marketplace, the Marketplace should
have adjusted the amount of the advance credit payments sent to your insurer
accordingly. If you did not notify the Marketplace about these life changes,
the advance credit payments may have been either too high or too low.
Advance credit payments that are
lower than the amount of premium tax credit on your tax return will reduce your
tax bill or increase your refund.
On
the other hand, if your advance credit payments are more than the premium tax
credit you are eligible for based on your actual income, you will need to repay
the excess amount, subject to certain caps. This will result in a smaller
refund or a larger bill when you file your return. The repayment amount
is based on your household income and family size. For more information on the
repayment if your household income is less than 400 percent of the federal
poverty line, the repayment amount is limited. Taxpayers with household incomes
of 400 percent or more of the federal poverty line must repay all of the excess
amount. See the instructions for Form 8962,Premium Tax Credit (PTC) for more information on the federal poverty line
amounts.
Normally, taxpayers may owe certain
penalties for late payments or underpayment of estimated tax. However, to help
smooth the process for the first year of the Affordable Care Act, the IRS will
waive these penalties for eligible taxpayers if they resulted from repayment of
excess advance payments of the premium tax credit. This has no effect on
the fee individuals will pay if they chose not to buy affordable health
coverage.
You
must complete Form 8962 to claim the premium tax credit and
reconcile your advance credit payments with the premium tax credit you are
eligible to claim on your return. You should receive Form 1095-A, Health Insurance Marketplace
Statement from your Marketplace by early
February. This form provides information you will need when completing Form
8962. If you have questions about the information on Form 1095-A for 2014, or
about receiving Form 1095-A for 2014, you should contact your Marketplace directly.
Remember that filing electronically
is the best and simplest way to file a complete and accurate tax return as it
guides individuals and tax preparers through the process and does all the math.
Electronic Filing options include free volunteer assistance, IRS Free
File for taxpayers who qualify,commercial software, and professional
assistance.
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