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What is a Form 1095-A and How Does Healthcare Insurance Affect Taxes?

How will the Affordable Healthcare Act affect Americans as they file tax returns this year?  The answer to the question lies in whether you have healthcare insurance through work or a government agency, or if you purchased it through one of the national healthcare exchanges.

If you elected to purchase health insurance from one of the national health care exchanges such as Covered California, your health exchange provider should send the 1095-A to your house, and it is important for your federal taxes and the return you will file with the IRS.  If you under-estimated your household income and received too large of a tax credit (subsidy) you will be responsible for paying the excess back out of your refund (if any).

The Form 1095-A will tell you how much your total healthcare insurance premium was, and the amount of the tax credit you received each month you were covered.  You will need that information in order to complete a different form that is part of your tax return – Form 8962.

The Form 8962 will reconcile the amount a taxpayer estimated they were going to earn in 2014 and the amount they actually earned.  It will then reconcile the amount of the subsidy that should have been received and tell the taxpayer if they owe the government some of it back or if the government owes them additional tax credit.

If you owe the IRS money as a result of the Form 8962 and are not receiving a refund, don’t panic.  You can make arrangements with the IRS to pay it over time.

For most of us (roughly 80% of American taxpayers) there is a new line on the Form 1040 tax return (Line 61 to be precise) that simply asks if you had healthcare this year.  If you had healthcare provided as a benefit at work or are insured through Medicare or Medicaid check the box and that’s all the impact you will have.