From Forbes, Robert A Green, November 14, 2014
The Patient Protection and Affordable Care Act, also known as Obamacare, was enacted in 2012 has taken several years to implement and phase in. Now that the Obamacare 2014 individual health insurance mandate is in effect, many taxpayers will face confusion over tax penalties, exemptions, premium tax credits, claw backs of subsidies (advanced credits) and extra tax-preparation fees to comply with Obamacare on 2014 tax filings.
There are three scenarios for dealing with the mandate on 2014 tax returns:
1. Off-exchange coverage: If you had ACA-compliant health insurance coverage for all of 2014 — either an individual plan purchased directly from an insurance company (off exchange), an employer plan or government-sponsored programs like Medicare or Medicaid — there’s little to do. Expect to receive new IRS Form 1095-B reporting your health insurance coverage from an insurance company and, if applicable, a Form 1095-C from your employer. Give the 1095s to your accountant and you’re finished. There won’t be any penalties, premium tax credits or return of exchange subsidies.
2. On-exchange coverage: If you purchased your 2014 health insurance on an exchange (marketplace), you must file new tax Form 8962 (Premium Tax Credit). When you applied for your 2014 health insurance coverage, you submitted estimates of your 2014 income which the exchange relied on for pricing your plan, perhaps offering a subsidized plan with “advanced credits.” The purpose of Form 8962 is to determine your rightful premium tax credit based on income reported on your 2014 tax return and to reconcile advanced credits (if any) with the premium tax credit calculated on Form 8962. Estimates probably won’t match actual income, especially for traders who have fluctuations in trading gains and losses.Therefore, one of three things will happen on Form 8962:
i. You will have a tax liability caused by advanced credits being greater than the premium tax credit.
ii. You will have a tax credit caused by advanced credits being less than the premium tax credit.
iii. No tax liability or credit because you used an exchange but did not receive an advanced credit and there is no premium tax credit.
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