The Affordable Care Act, better known as Obamacare, continues to divide the country as advocates and opponents of the health care reform law continue to disagree about its merits and shortcomings. Yet like it or hate it, taxpayers will get their first exposure to Obamacare's impact on their tax returns during the coming tax season.
Many people are concerned that the form they'll need to prepare to prove that they're entitled to any subsidies they received for their Obamacare premiums will prove to be a big headache for taxpayers. Admittedly, whenever the IRS comes out with a brand new tax form, people get scared about how they'll figure out how to complete it properly. However, with the help of the Obamacare tax form that provides valuable information about your health care coverage -- IRS Form 1095-A [opens PDF] -- you'll have an easier time getting some of the information you need to avoid any nasty surprises from Obamacare-related taxes.
Looking at Form 1095-A
IRS Form 1095-A is also known as the Health Insurance Marketplace Statement, and like the W-2 and 1099 tax forms you'll get that report various types of income, this Obamacare tax form gives you information about your health-insurance coverage from Obamacare marketplaces.
In Part 1, you'll find basic personal information about yourself and your family as well as the policy you have under Obamacare. In particular, the most important aspects of this part of the form are the policy start and end dates and the information on your insurance company. You'll also want to check to make sure that your personal information is correct.
Part 2 goes into more detail about the coverage that you received under Obamacare. By listing each individual family member who was covered under the policy, you'll be able to list each of those family members in your tax return. That, combined with the dates of coverage, should help you establish that you had qualifying coverage for the required period of time and therefore aren't subject to any penalties for not being covered by health insurance.
Part 3 of the form is the most helpful, as it gives you numbers that you will transfer directly onto the Obamacare tax form you'll file with the IRS along with your return. In Column A, you'll find the monthly premium for your policy during any months in which you were covered, and Column B gives the relevant cost of the silver-tier policy that you'll need in order to help calculate the correct amount of your Obamacare subsidy. Finally, Column C lists how much your insurance company actually received in subsidies for your policy, which will help reconcile any disparities between what was paid and what should have been paid in premium subsidies.
What Form 1095-A doesn't tell you
Unfortunately, the Obamacare tax form you'll get from your health-insurance provider won't have all of the information you'll need to report to the IRS. The premium tax credit form [opens PDF], also known as IRS Form 8962, requires you to refer to your adjusted gross income on your tax return, as well as looking up the appropriate federal poverty line figure for your state. In addition, you'll need to do many of the calculations to compare the information you provide from Form 1095-A with other tax information from elsewhere on your return.
Nevertheless, it's clear that you'll need Form 1095-A to help make your tax preparation more manageable. Because of that, the IRS has required insurance providers to send the form to you on or before Jan. 31. That's the same timeframe under which you should get W-2s from your employer and similar tax forms, and you should therefore be able to file quickly without the risk of having to amend your return due to a late-received tax form.
Tax preparation is always a challenge, and new Obamacare tax forms won't make it any more fun. By understanding your Form 1095-A, though, getting your taxes done should be a little easier.