[IMGCAP(1)]As we make our way towards 2015, the Affordable Care Act and how it will affect the upcoming tax season seems to be clearer, according to Chuck McCabe, president of Peoples Income Tax and The Income Tax School. “While there are still some questions to be answered, there are a number of issues that have been settled and that tax preparers should be aware of as we head into tax season,” he said.

“There’s been quite a bit of back and forth about a disputed provision of the Affordable Care Act – the one where millions of Americans get tax subsidies,” McCabe said. “The dispute is whether people who qualify for tax credits and bought insurance through the federal exchange -- because their state did not set up a marketplace -- will receive them. The law says that you qualify for tax credits if you buy insurance on an exchange ‘established by the state.’ The dispute is in the part of the clause that ends in ‘established by the state.’”

In July, a three-judge panel from the D.C. Circuit Court ruled that those who qualified for subsidies and purchased insurance on federal exchanges because their states did not set up an exchange would not receive those subsidies because they did not purchase insurance through a state exchange, McCabe explained.

“The Obama administration has requested that the U.S. Circuit Court of Appeals for the District of Columbia rehear the case in front of the full complement of judges. That request was granted and the rehearing is set for December 17,” he said.

“If your clients purchased health insurance through any of the exchanges, there will be a new form they have to bring you from their insurance exchange before you can file their tax return. The form, Form 1095-A, lists everyone in the household who has coverage and what the government paid for each person in subsidies,” he said.

In addition to this form, the standard Form 1040 is going to have a few changes to it, McCabe noted:

  • Line 46: You will need to report the excess of any premium tax credit received throughout the year.
  • Line 62: You will need to report whether your client has the minimum essential coverage or owes a penalty.
  • Line 69: You will need to report the amount of the Premium Tax Credit

“Form 8962 is the Premium Tax Credit Form. This form is to be used to claim the premium tax credit or reconcile any PTC amounts received in advance during the year to cover health care premiums,” McCabe said.
Finally, Form 8965 is the health coverage exemption form. This form is used to report exemptions from insurance requirements.

Many organizations are predicting a delay to the tax season due to the need for Form 1095-A before filing tax returns. A number of observers speculate that these forms will not be sent out by their January 31 deadline, thus delaying the start to the season, according to McCabe.

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