Most Americans must have health insurance. It’s the law.

Surprised by tax penaltyBut as the 2014 tax filing season gets underway, you may be caught off guard by an extra tax of $95 or more due with your 2014 tax return. 

That’s because if you went for three consecutive months or more during 2014 without health insurance, you will be hit with a penalty tax (unless you are exempt).

Here is the amount of the penalty, which will increase for 2015 and 2016:

2014 2015 2016
$95 per adult
$47.50 per child
Family Maximum of $285 OR 1% household income, whichever is GREATER
$325 per adult
$162.50 per child
Family Maximum of $975 OR 2% household income, whichever is GREATER
$695 per adult
$347.50 per child
Family Maximum of $2,085 OR 2.5% of household income, whichever is GREATER

If you were penalized for not having coverage in 2014, and still have not purchased coverage for 2015, the government is giving you a second chance to buy 2015 coverage and avoid another — even higher — penalty.

Virginia residents can visit www.enrollvirginianow.com to enroll in less than 15 minutes!

Second Chance to Enroll — Special Enrollment Period March 15 – April 30, 2015

Although open enrollment for 2015 ended on February 15, 2015, you can enroll in coverage between March 15 and April 30, 2015 if all of the following are true:

  • You live in a state (including Virginia) that uses the federal marketplace (healthcare.gov); and
  • You are NOT enrolled in health insurance for 2015; and
  • You attest that when you filed your 2014 tax return you paid the fee for not being covered in 2014; and
  • You attest that you first learned about or understood the implications of the penalty tax after open enrollment ended on February 15, 2015, as a result of preparing your 2014 tax return.

In other words, you must state that you did not understand the law enough to realize you’d be penalized for not being covered in 2014, AND that you only found out by virtue of completing your 2014 tax return, by which time it was too late to buy coverage for 2015 during regular open enrollment, which ended on February 15, 2015.

By taking advantage of the special enrollment period, you can get 2015 coverage, effective on the following dates:

  • Enroll between March 15 – April 14 — Coverage effective May 1
  • Enroll between April 15 – April 30 — Coverage effective June 1

Virginia Medical Plans Can Help

If this situation applies to you, visit www.enrollvirginianow.com to see available plans.

If you need help understanding your options and selecting the best plan for you, give us a call at 703-707-8270.

Being covered in 2015 will save you from some of the penalty.  AND our services are completely free!  You pay no more for your coverage when you purchase it through us, but you get the benefit of our guidance and help.

We are happy to help. Call our office at 703-707-8270.

Piggy Bank - Tax SavingsAre you self-employed or thinking of becoming self-employed?

The Affordable Care Act has made health insurance available to anyone — regardless of current medical status. This means you can purchase coverage for yourself and/or your family on the individual health insurance market — even if you have a pre-existing medical condition.

But did you know today’s tax code can save you money if you’re self-employed and you buy health insurance?

Here are 5 things every self-employed person should know about health insurance and taxes:

1 – Premium Tax Credit (Subsidies)

Depending on your income, you may be eligible for financial assistance to help you pay for health insurance. The government subsidy comes in the form of a premium tax credit and can be paid directly to your insurance carrier to reduce your financial burden. (Subsidies are available to anyone who qualifies, not just the self-employed.)

2 – Self-Employed Health Insurance Premium Deduction

If you are self-employed and show a profit for the year, you can deduct 100% of your health insurance premium on your personal income tax return — Form 1040, Line 29. This reduces your adjusted gross income (AGI) for the year.

Tip: This means if you are self-employed and collected a subsidy to help pay for coverage, your AGI depends on the amount of health insurance premium you paid, and the amount of health insurance premium you paid depends on your AGI — a circular cycle with seemingly no end! The IRS released regulation 26 CFR 601.105 with instructions and examples of how to figure this out. It’s pretty tedious, so if in doubt, consult a tax professional. Also, some do-it-yourself tax programs can help.

Important: You can not take the Line 29 deduction if you were eligible for group coverage from your or your spouse’s employer.

3 – More-than-2% S-corp Shareholders

Since 2008, more-than-2% shareholders of an S-corp could buy individual health insurance in their own name, and then get reimbursed by the S-corp. The premiums would be included on the shareholder’s W-2, and then deducted on the first page of the 1040, resulting in a lower AGI.

However, a provision in the Affordable Care Act prohibits employers from reimbursing employees for individual health insurance premiums — and the IRS will assess a penalty for doing so.

Now what?

In February of 2015, the IRS released Notice 2015-17, and it’s good news for more-than-2% S-corp shareholders, as well other small business owners. Here’s what you need to know if you’re self-employed:

  • Assessment of the penalties for reimbursing individual health insurance premiums has been delayed until June 30, 2015 for businesses with fewer than 50 FTE. (Penalties were supposed to start 1/1/14).
  • More-than-2% shareholders are exempt from the Affordable Care Act’s market reforms at least through 2015.
  • If a shareholder and his/her spouse are both employed by the corporation, AND they are covered together on one individual health insurance policy, they can continue to have the corporation reimburse their health insurance premiums and deduct them on their 1040. (As provided in IRS Notice 2008-1)

4 – Health Savings Accounts

If you are self-employed, it may be worthwhile to consider purchasing a high deductible health plan (HDHP), with a health savings account (HSA). If you are covered under an HSA-qualified HDHP, you can make pre-tax contributions to an HSA to pay for medical expenses.

Your HSA contributions are deducted on your personal 1040 – whether or not you itemize deductions.

5 – Deduction of Medical Expenses

If you itemize your tax deductions AND you paid a lot in medical expenses for the year, you may be able to deduct some of those medical expenses — and premiums you paid for health insurance and qualified long-term care — on Schedule A of your tax return.

But, you can’t both deduct your health insurance premiums as explained above AND include those premiums in your deductible medical expenses.

So it’s a good idea to keep track of your medical expenses for the year, just in case you hit that threshold and can deduct them on your income taxes.

Tip: Only medical expenses in excess of a certain percentage of your AGI can be deducted (7.5% through 2016 for filers age 65 and up, 10% for all other filers; 10% for all filers starting in 2017).

For More Information

If you are self-insured or are considering starting your own business and want to explore your options for health insurance on the individual market, please give our office a call at 703-707-8270.

For specific tax advice, it’s always best to consult a tax professional.

Note: this post was originally published on May 12, 2014 but has been updated for 2015.

When it comes to health insurance, a qualifying event is a life event that makes you eligible to purchase health insurance outside the dates of open enrollment.  A qualifying event triggers a special enrollment period lasting 30-60 days, depending on the event.  Read more about special enrollment periods.

Examples of Qualifying Events

  • Change in marital status (marriage/divorce/death of a spouse)
  • Relocation to a new state or to an area of your current state where the plans offered are different
  • Change in family size (birth/adoption/death of a child)
  • Involuntary loss of minimum essential health coverage (change in employment status, cancellation of current coverage)
  • Certain changes in income
  • Expiration of COBRA benefits

Newly added by the Department of Health and Human Services (HHS) and effective April, 2015:

  • A change in family structure — for example becoming a dependent or gaining a dependent through birth, adoption, or placement in foster care — which causes your current plan to no longer meet your needs. You could switch, for example, from single to family coverage during a special enrollment period. HHS is not mandating this change until 2017, but is encouraging exchanges to offer it as soon as possible.
  • An increase in your income to the federal poverty level (FPL) if you live in a state which has not expanded Medicaid. Earning at least 100% of FPL takes you out of the Medicaid coverage gap and makes you eligible for premium tax credits when buying health insurance on the exchange.
  • If a court order requires someone to provide health insurance (for example during divorce proceedings), the coverage must be available the first day the court order takes effect, even if that date is outside open enrollment.
  • If you have a pre-Affordable Care Act plan which does not run on a calendar year basis, and that coverage terminates outside the dates of open enrollment.

What Should You Do if You Have a Qualifying Event?

If you do have a qualifying event, you must have proof of the event in order to be eligible to purchase a new plan.  When applying for coverage, you will need to submit verification of the event and the date it occurred. Without verification, most carriers will not process the application.

If you have a qualifying event and you are eligible for a subsidy (click here to find out), then you will need to purchase coverage on your state’s health insurance exchange (healthcare.gov for Virginia residents, marylandhealthconnection.com for Maryland residents, dchealthlink.com for DC residents).

If you are not eligible for a subsidy, you can apply directly with the carrier of your choice:

But remember, you have a limited amount of time after a qualifying event to purchase new coverage, so you must act quickly.

Give our office a call at 703-707-8270 and we’d be glad to help.

IRS Form 1095-AIf you bought health insurance in 2014 through the federal health insurance marketplace (aka, healthcare.gov) AND you collected a subsidy from the government to help you pay for your coverage, then you should have received a tax form 1095-A in the mail during late January or early February, 2015.

IRS Form 1095-A – Health Insurance Marketplace Statement — is new for the 2014 tax season, and provides details of how much you paid in premiums, how much subsidy you received, and information used to calculate how much subsidy you should have received.

Recently, government officials discovered errors in approximately 800,000 1095-A forms.

Corrected forms will be sent in early March.

What Was the Error on Some 1095-A Forms?

Column B in Part III of the 1095-A statement shows, by month, the premium of the second lowest cost silver plan (SLCSP).  SLCSP is used to calculate whether or not you received the right amount of subsidy.

SLCSP is incorrect on some people’s form.

How Will You Know if Your 1095-A is Wrong?

You can sign in to your account on healthcare.gov to find out if your form is affected by the error. Only about 20% of forms contain an error.

What Should You Do if Your 1095-A is Wrong?

If you have already filed your 2014 tax return

The Treasury Department announced that if you already filed your taxes using an incorrect 1095-A, you do not need to refile.  Also, in the event that refiling with the corrected form would result in additional taxes, you will not owe anything more.

However, you may want to refile with the corrected form if the corrected SLCSP is higher than the incorrect SLCSP.  In that case, you may be be entitled to more money back. Most experts recommend if the difference is slight, it may not be worth the time and expense of refiling. Please consult a tax professional for specific advice.

If you have not yet filed your 2014 tax return

Wait to file your return until you have received your corrected form 1095-A.

Corrected forms are expected to be mailed in early March. Your account on healthcare.gov will also be updated once the corrected form is available.

Visit healthcare.gov’s online tool to find your correct SLCSP if you want to file your taxes before your corrected form arrives.

If you have any questions about your health insurance coverage, please don’t hesitate to call us at (703) 707-8270.

For more information about tax filing with the Affordable Care Act, click here.

Please consult a tax professional for specific tax advice.