1099 Tax Software Blog

The Affordable Care Act (ACA) or Obamacare has generated a new collection of tax forms that employers, insurers and individuals will be required to file each year.  At this point, the published forms are draft versions, but the IRS assures us that they will have the final forms and instructions available by the filing deadline.  That deadline for filing will be January 31 of each year, similar to W-2 and 1099 filing deadlines.  Although the forms should be available, the filing and reporting requirements will not be mandatory for tax year 2014, but will be required for tax year 2015.

Form 1095-A

The first form is 1095-A, which is filed by all Health Insurance Marketplaces, including a copy being provided to individuals who purchased a qualified health plan through the ACA Marketplace.  Because having health insurance is mandatory, those who purchase a plan through the Marketplace may be entitled to a tax credit.  According the IRS draft instructions, the copy of 1095-A can be used by individuals to:

• Allow them to obtain the premium tax credit, if they qualify
• Reconcile advance payments of the credit on their returns
• File an accurate tax return

This information is also furnished to the IRS so that they have the information on all family members in each household that enrolled in a qualified plan.

Some of the key information on the form includes:

• Health policy coverage dates
• Amount of advance credit payments made
• Total amount of premiums paid
• The method used to compute the amount of premium tax credit available

The Premium Tax Credit

The premium tax credit is available to individuals who purchased health coverage through the Marketplace and meet certain criteria such as:

• Not eligible for employer of government health plans
• Are within certain income limits (explained below)
• Cannot be claimed as a dependent by another person
• Do not use filing status Married Filing Separately

Some individuals may choose to receive the credit in the form of reduced payments to their insurer while others will wait to get is as part of their tax refund.  One of the reasons for form 1095-A is to allow those who receive the credit as premium deductions to accurately file their taxes.  The total premium tax credit depends on the size of the household and income.  The general formula for eligibility is between 100% and 400% of the federal poverty level, for example:

• $11,490 (100%) up to $45,960 (400%) for one individual.
• $15,510 (100%) up to $62,040 (400%) for a family of two.
• $23,550 (100%) up to $94,200 (400%) for a family of four.

Households with lower incomes than this range could possibly be eligible for Medicaid and would not need the credit or qualify.  The amount of the credit is determined by income level, with lower income households receiving a larger tax credit than high-income households.  All that is certain is that individuals will now have another form to pay attention to in filing their taxes, but there may be some refund available that makes it worth the effort.

by

Erich J. Ruth

Erich J. Ruth provides technical support for National Software which is the parent company for 1099FIRE. 1099FIRE develops and markets a comprehensive range of products that enables any size of business or institution to effectively manage and comply with year-end filing requirements. 1099FIRE is an employee-owned company located in Phoenix, Arizona.

If you have any questions or comments about our software, feel free to contact us at any time.