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Changes in the 2015 Tax Season from the Affordable Care Act
By Ashu Bhandari
Introduction
Ashu Bhandari worked in high-end hospitality and retail for nearly 20 years before retiring abroad with his wife. Lending his professional skills to local business owners on a pro bono basis, Ashu Bhandari collaborated with Karen Gibson, CPA, in the establishment of a private accounting firm and subsequent merger with one of the largest public accounting firms worldwide.
Accountants have their hands full navigating the 2015 tax season and changes brought about by the Affordable Care Act. Although the Act went into effect at the beginning of 2014, tax penalties for the uninsured (and tax credits for those insured through the Exchange) are only coming into effect this tax year. Below are a couple of the major changes to be aware of before the April 15, 2015 deadline.
2015 Tax Season
Required Coverage Penalties This year, tax filers are either required to show that they meet required coverage criteria—either through Form 1095-C from an employer or through Form 1095-B from an insurer—and check the appropriate box. For individuals who neither have the required coverage nor meet exemption criteria, a penalty of either $95 per adult (plus $47.50 per child) or 1 percent of household income--whichever is greater--will apply.
Conclusion
Premium Tax Credit PitfallsThe Premium Tax Credit is designed to alleviate the burden of coverage costs with either an additional refund or reduction in tax liability. However, this particular credit is advanceable, which means it may have already been paid out if taxpayers didn’t opt out when signing up for coverage. In practice, this means that taxpayers shouldn’t necessarily include the extra credit in their financial planning.