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What You Need to Know About the Affordable Care Act – Premium Tax Credit

If you or anyone in your family purchased coverage through the Marketplace, a Form 1095-A will be submitted which provides information about the coverage.  This form will report the total monthly health insurance premiums paid to the insurance company you selected through the marketplace.  It will also list the amount of premium assistance you received in the form of “advance payments” of the premium tax credit that were paid directly to the Insurance Company on the taxpayer’s behalf.

If you get health insurance through the marketplace you may be eligible for the “Premium tax Credit” This credit can help make purchasing health insurance coverage more affordable for people with moderate incomes.  During the individual’s enrollment in the Marketplace, taxpayers will provide their projected income and family composition for the year so the Marketplace can estimate the amount of the premium tax credit able to be claimed.  Very important note:  Once you have provided the Marketplace your projected income and once you have health insurance through the Marketplace, it is very important that you report any changes to your income, household, address, and health coverage eligibility to the Marketplace as soon as possible.  These updates may change your coverage or the savings you are eligible for.  Once the Marketplace has estimated the amount of the premium tax credit you have a choice to receive the “premium tax credit” now or later with your return.  If you choose to “get it now” then some or all of the estimated credit paid in advance will go directly to your insurance company to lower what will be paid out of pocket for monthly premiums.  If you choose to “get it later” you will have to wait to get all of the credit after filing your federal income tax return

If you choose the advance payment option, Form 8962 will be required to be filed with their federal return to reconcile their advance credit payments with the premium tax credit you are eligible to claim on their return.  Form 1095-A will include all the information needed to complete form 8962.  If the amount of advance payments received is less than the actual premium tax credit calculated on form 8962 then you will get the difference as a higher refund or lower tax due.  Now if the advance payments that were paid to their health care provider were more than the actual credit calculated on form 8962 then difference will be repaid through your tax return.

The credit is calculated on form 8962 by looking at their household income “AGI” and comparing that to the federal poverty line for their income based on their family size.  The IRS has a chart that shows the income poverty level.  For example, family size of 1 poverty line income is $11,490.  Note you can still get a credit if your household income is at least 100% but not more than 400% of that Federal poverty line for their family size.

To help smooth the process for the first year of the Affordable care act, the IRS will waive penalties if they result from repayment of excess advance payments of the tax credit for Marketplace coverage.  Make sure that you complete page 1 of form 2210 “Underpayment of Estimated Tax by Individuals” and check box A in Part II.  You should include this form along with the statement “Received excess advance payment of the premium tax credit” with their tax return.

If you receive a notice of “failure to pay” penalty, submit a letter to the address on the notice that contains the statement “I am eligible for the relief granted under Notice 2015-09 because I received excess advance payment of the premium tax credit.”

If you do not have Health Coverage:

Taxpayers that do not have health insurance coverage for 2014 will pay a fee “penalty” on their tax return.    If you do not have health insurance coverage in 2014 you will pay the higher of 1% of your yearly household income or $95 per person for the year (maximum penalty per family would be $285).  It is very important that you have health insurance coverage.

Please contact the Marketplace for additional information.  You can also visit www.healthcare.gov for additional information regarding the health care coverage.


Feel free to contact any one of our Firm’s tax specialists at info@rosenfieldandco.com.

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