Got Health Care Subsidy? Watch Your Mailbox
If you're among the millions of consumers who got financial help for health insurance last year under President Barack Obama's law, better keep an eye on your mailbox.
The administration said Monday it has started sending out tax reporting forms that you'll need to fill out your 2014 return. Like W-2s for health care, they're for people who got health insurance tax credits provided under the law.
Because this is the first time Americans will experience the complex connections between the health care law and taxes, there's concern that some people may not realize the new forms are important, and that they do need to open that envelope. Some consumers may not know what to do with the paperwork.
Called 1095-A, the forms come filled out with information from HealthCare.gov or your state's insurance exchange. They list who in each household got subsidized coverage, and how much the government paid each month to help with premiums.
You don't actually file the form with your tax return, but you can't complete your return without the information it contains.
Taxpayers, or their tax preparers, will use the financial details to fill out yet another form — 8962. That one is used to determine whether people received the right amount of assistance that they were legally entitled to.
The amount of the tax credit is based on a formula that takes into account income, household size, and health insurance costs in your community.
Those who got too much of a subsidy will get their tax refunds reduced by the IRS. For example, you can get dinged if your income went up during the year, and you didn't realize you had to report that to HealthCare.gov or your state insurance exchange.
If you received less of a subsidy than you were entitled to, the IRS will owe you instead.
The Health and Human Services department said it has started sending out forms to consumers in states where the federal government is running the insurance markets. The first batches should start arriving by midweek. The forms can also be downloaded from your HealthCare.gov account.
States running their own insurance exchanges — including California and New York — will send out the forms separately. But they still must meet a Feb. 2 postmark deadline.
Insurers say the feds have told them that they expect to mail about 4.5 million forms and they're tackling the massive job state by state.
Tax preparation companies are seeing a whole new line of business in the health care law. But insurers are worried that perplexed consumers will pepper them with tax questions they're not qualified to answer. The health care law will mean lots more work for the IRS, and Commissioner John Koskinen is warning Congress that budget cuts could hamper taxpayer services this filing season.
The Obama administration has been trying to offer reassurance.
"In the coming weeks, HHS will work with other agencies, tax preparers and community organizations to arm ... consumers with the information they need to know as they prepare to file their taxes," Secretary Sylvia M. Burwell said in a statement.
The health care law provides subsidized private health insurance for people who don't have access to coverage on the job. Funneling the subsidies through the tax system allowed the White House to claim that the law was "the largest tax cut for health care in American history." But the downside is it adds more complexity to a tax system that's already impenetrable for many people.
Here are some pointers for consumers:
- You may get more than one 1095-A. That could happen for any number of reasons, from having a baby to switching plans during the year. You'll need to keep all of them for filing your taxes.
- Contact HealthCare.gov or your state insurance exchange if you believe there is a mistake on your 1095-A. Minor issues such as misspellings should not cause big problems, but it may take some effort to resolve financial inaccuracies.
- If you got employer coverage part way through last year and were only in the insurance exchange for a few months, you will still need your 1095-A to account for the subsidies that you got.
- If you're used to filing Form 1040EZ, you can't do that any longer if you got subsidized health care. You'll have to file one of the longer forms instead.