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Your Tax Return and New Health Care Rules

One of the recurrent themes of 2015 with respect to what we call income tax season is the treatment of taxpayers who either (a) had no health insurance during 2014 or (b) obtained coverage through healthcare.gov and with it a subsidy for some portion of the insurance cost. With 2014 being the first year for these items, no-one has experienced filing with these additional considerations. Anyone exposed to the media in all its forms should be aware that the nationwide tax preparer firms are advertising this issue as a reason to seek their assistance in preparing your return.

For many of us, that may be the way to go – pay a little to get the advice and tax preparation. No doubt, some of us may benefit from good advice on this and other matters from these paid preparers. If you have relied in the past on calling the IRS for assistance, though no one should because we are not entitled to rely on any advice provided over the phone by the IRS, the media has let us know many times over this year that the IRS has cut back on its customer service. Now, whether that is a ploy to get more funding from Congress or reflects a genuine expansion of responsibility and demand, is not clear. The point is moot, of course, since we should all know by now that – as stated above – one cannot rely on the advice provided by the IRS over the phone. So you have not really lost anything by having that option made less available and the IRS really should not be raising that cutback as a basis for more funding.

All this outside advice aside, what do you need to understand on the question of the health insurance impact on your taxes? If you are a taxpayer without “minimum essential” health insurance you will be required to pay a penalty. The penalty is the higher of either (a) 1% of your annual household income up to a maximum based on the national average premium for a bronze plan or (b) $95 per adult uninsured family member ($47.50 per minor child) for a maximum per family of $285.

If you received a subsidy – tax credit – to assist in paying your health care premium through healthcare.gov, that credit was based on your anticipated income and tax filing status (individual, joint and dependents). If your income turns out to be greater than the amount on which the subsidy was granted, then you may be required to repay a portion of the credit as a part of the total obligation on your tax return. On the other hand, if your income was lower, then you may be entitled to additional credits on your return.

Bottom line, maybe you can figure this out yourself and will not have to pay for advice and return preparation. 

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