Preparing ObamaCare’s First Tax Return

How ACA might complicate 2014 filings

by Mike Owens & Michael Mahoney

Mr. Owens is Senior Vice President of Chicago-based GoHealth. Mr. Mahoney is Vice President of Consumer Marketing for GoHealth.

For the first time, health insurance is showing up on tax forms causing what is expected to be the most complicated tax season in recent history.

The additional tax filing paperwork this year is a result of the Affordable Care Act’s tax subsidies and requirement that virtually everyone enrolls in health insurance or pays a tax penalty. For most people with health insurance, that will mean simply checking a box on their tax returns.

However, for others, the health insurance mandate could complicate an already confusing tax season. No matter your situation, these guidelines can help you prepare for a smooth tax season.

If you received a tax subsidy

Last year, 85 percent of Affordable-Care enrollees received government tax subsidies to make their health coverage more affordable.

Those individuals and families were granted subsidies based on their projected income for 2014, not their actual income. If you were one of those people, you will need to report whether your actual income was higher or lower than the projection on your tax returns.

If it was higher, then you might owe the government money; if it was lower, then you might qualify for a larger refund. If you received a tax subsidy in 2014, then you must present you actual income for the year when you file your tax return. You should receive Form 1095-A by early February, which will outline the exact tax subsidy amount you received. You will need this form to file your tax return properly.

If you had coverage and did not get a subsidy If you had health insurance last year, there is very little that needs to be done. You will have to report the fact that you had minimal essential coverage as outlined by the Affordable Care Act on your tax forms.

You simply need to check the appropriate box on Form 1040. No further action is required.

If you did not have health insurance

If you did not have health coverage last year, you may have to pay a fine, known as the individual shared responsibility payment.

That payment amounts to 1 percent of a person’s household income or $95 per adult and $47.50 per child – whichever is greater. Many individuals think they just owe $95, but those with higher incomes could end up paying a much greater fine.

That payment amounts to 1 percent of a person’s household income or $95 per adult and $47.50 per child – whichever is greater. Many individuals think they just owe $95, but those with higher incomes could end up paying a much greater fine

You should note that the 1 percent fine is applied to household income after subtracting the tax filing threshold amount, which is $10,150 for an individual. For example, someone who earned $40,000 would only be fined 1 percent of $29,850 ($40,000 – $10,150 = $29,850), so their fine would be $298.50.

There is another catch: the penalty is charged on a monthly basis once a person is uninsured for more than three months. To find out exactly how much is owed for going uninsured – whether it was four months or the entire year – use Form 8965.

If you do end up facing a fine, you will see it represented either as an addition to your tax bill or a subtraction from your tax refund.

What are the exemptions from the tax penalty?

Not everyone who was uninsured in 2014 will be required to pay a fine. If you did not have health insurance in 2014 but have a justifiable reason, you may be exempt from it.

Health coverage exemptions include being a member of a specific religious sect that opposes health insurance and not having to file a tax return due to your income level. In addition, there are also hardship exemptions, which pertain to an individual’s ability to purchase health insurance.

These hardship exemptions include getting evicted from your home, facing homelessness, and filing for bankruptcy in the last six months. You can request forms from the federal or state marketplaces in order to apply for an exemption. If you were exempt last year, you can file Form 8965 with your Form 1040 to prove it.

Prepare for 2015

Next year, the tax penalty for going uninsured will increase substantially to $325 for each adult and $162.50 for each child, or 2 percent of income, whichever is greater. It will continue to increase the following year. If you faced a fine for not having health insurance in 2014, you still have time to avoid making the same mistake twice.

The 2015 open enrollment period ends on February 15, so enrolling in health insurance today is the best way to avoid complications during next year’s tax time. ♦



REFERENCES 1. Report shows more options and savings for consumers who shop in the Health Insurance Marketplace in 2015. (2014, December 4). Retrieved January 26, 2015, from
2. Health Care Law: What’s New For Individuals and Families (2014, December 1). Retrieved January 26, 2015, from