IRS Health Care Tax Tips

The IRS offers the following tips on Forms 1040, 1040A, and 1040EZ that relate to the health care law:

  • Form 8965, Health Coverage Exemptions: Complete this form to claim a coverage exemption or report a Marketplace-granted coverage exemption. Use the worksheet in the Form 8965 Instructions if you need to calculate the shared responsibility payment.
  • Form 8962, Premium Tax Credit: Complete this form to claim this credit on your tax return and reconcile advance payments of the premium tax credit.
  • Form 1095, Health Care information Forms: If you enrolled in coverage through the Health Insurance Marketplace, you should get Form 1095-A, Health Insurance Marketplace Statement, which will help complete Form 8962. Wait to file until you get this form. Your health coverage provider or your employer may give you a Form 1095-B, Health Coverage, or Form 1095-C, Employer-Provided Health Insurance Offer and Coverage. You do not have to wait to get these forms before your file your tax return.
  • Form 1040:
  1. Line 46: Enter advance payments of the premium tax credit that must be repaid.
  2. Line 61: Report health coverage or enter individual shared responsibility payment.
  3. Line 69: Report net premium tax credit if the allowed premium tax credit is more than advance credit payments paid on your behalf.
  • Form 1040-A
  1. Line 29: Enter advance payments of the premium tax credit that must be repaid.
  2. Line 38: Report health coverage or enter individual shared responsibility payment.
  3. Line 45: Report net premium tax credit if the allowed premium tax credit is more than advance credit payments paid on your behalf.
  • Form 1040-EZ
  1. Line 11: Report health coverage or enter individual shared responsibility payment.
  2. Form 1040EZ cannot be used to report advance payments or to claim the premium tax credit.

For more information about the Affordable Care Act and filing your 2015 income tax return visit for more information on this topic if you file Form 1040-NR or 1040-NR-EZ.

IRS Extends ACA Reporting Deadlines

IRS-ACAThe IRS issued a two-month extension for employers and issuers to report on offers of health coverage and coverage provided. The deadlines for reporting to the IRS by paper have been extended to May 31 or June 30 for electronic submissions. Greatland Corp. advises employers to continue with preparations as if the deadlines had not been pushed back. Bob Nault, Greatland’s CEO said that waiting until the last minute can lead to failure to file 1095 forms for the 2015 tax year, which could bring penalties of up to $1 million on small businesses. Maximum penalties to payers for failure to file correct information returns, including furnishing an incorrect name/TIN to IRS are $3 million/year ($1 million for small businesses).

Janice Kreuger, ACA subject matter expert for Greatland said, “We are hearing from a lot of businesses that think the IRS will not enforce fines for the 2015 reporting year. This is simply not the case. The IRS will not fine employers and insurers for mistakes. However, they still need to file and file on time, even with the extended deadlines.

The IRS imposes the following fines for returns filed beginning January 1, 2016:

  • $50 per information return if you file correctly within 30 days of the due date.
  • $100 per information return if you file correctly more than 30 days after the due date, but by August 1.
  • $250 per information return if you file after August 1 or you do not file required information returns.
  • $500 for a return for intentional disregard with no maximum penalty.

Major Health Insurance Changes for the New Year

Covered CA 2016 ChangesCovered California is reminding consumers and small businesses about important changes in 2016. Starting January 1, Covered California increased access to plans and providers and offered more health plans, and increased the number of benefits that are not subject to a deductible. Here is a run-down of the changes:

Most California Consumers Get New Forms for the 2015 Tax Year
This year, consumers who are insured through their employer or a government program, like Medi-Cal, will get Form 1095-B or Form 1095-C. The forms show who maintained minimum essential coverage and is not liable for the tax penalty. Consumers under Covered California will continue to get a Form 1095-A. For more information, visit

The Penalty for Not Buying Affordable Insurance Is Going Up — A Lot
The IRS penalty applies to people who go without insurance when they can afford to buy it. It will increase for 2016 to at least $695 per adult and $347.50 per child under 18 or 2.5% of household income, whichever is greater. A recent study by the Henry J. Kaiser Family Foundation estimates that the average household penalty in 2016 will be $969, which is a 47% increase from 2015. For more information, visit

New Requirements and New Options for Many of California’s Small Businesses
Employers with more than 50 full-time-equivalent (FTE) employees must offer health insurance to employees or pay a penalty. Through 2015, this requirement applied only to businesses with more than 100 employees. Any of these employers with an employee who does not take their offer of coverage will have to pay a penalty if the employee goes on to get financial assistance to purchase coverage through Covered California. For more information, visit

Covered California for Small Business will expand beyond the ceiling of 50 employees to serve companies employing 100 or fewer FTE employees. For more information, visit

Major Improvements in Choice, Access and Benefits
Covered California used its power as an active purchaser to hold down rate changes for a second year. Before the Affordable Care Act, consumers regularly experienced double-digit premium increases. For 2016, Covered California negotiated a weighted average change of 4%, which is lower than last year’s change of 4.2%. In addition, nearly 90% of Covered California enrollees get some financial assistance to help pay premiums. On average, those subsidies resulted in more than $5,200 for each household in 2014.

Benefit Changes for the 2016 coverage year:

  • The majority of Bronze plan consumers now get three office visits a year to a primary care provider or specialist with no deductible. Other needed services, such as lab tests and rehabilitation, will not be subject to a deductible.
  • Covered California’s Silver plan will combine copay and coinsurance into a single product. Every doctor visit, lab test, and prescription will not be subject to a deductible in this single product. Consumers with chronic conditions will be protected by a cap on specialty drugs. The vast majority of consumers will see their specialty drugs capped at $250 per month, per prescription. Plus, because of Covered California’s standard benefit design, the caps must be offered by every health insurance plan in the individual market and by all plans offered by the exchange. For more information, visit
  • Adult dental coverage is now offered as an add-on.
  • 6% of Covered California consumers will be able to choose from at least three health insurance companies thanks to the addition of two new health insurance companies — UnitedHealthcare Benefits Plan of California and Oscar Health Plan of California as well as the expansion of Blue Shield of California and Health Net.
  • More than 90% of hospitals (general acute centers as designated by the California Office of Statewide Health Planning and Development) in California will be available through at least one health insurance company, and 74% will be available through three or more companies.

 Medi-Cal Coverage for Undocumented Children

  • Medi-Cal will be expanded to all children regardless of their immigration status. The new law goes into effect in May 2016.

Health Care Improvements for All Californians
Starting July 1, health plans must publish and maintain printed and online provider directories. Health plans must maintain accurate provider directories, including routine updates. For more information, visit

A new state law will require health plans and insurers to implement formula-tier requirements and cost-sharing caps similar to products offered through Covered California. Assembly Bill 339 requires plans and insurers to have formularies that do not discourage the enrollment of people with certain health conditions. It also sets requirements regarding access to in-network retail pharmacies, standardized formularies, and coverage for certain single-tablet HIV and AIDS treatments. For more information, visit

IRS Fines Threaten HRAs

The Council for Affordable Health Coverage and 25 allied organizations urged Congress to take up the Small Business Healthcare Relief Act (H.R. 2911/S. 1697) in the remaining days of the congressional session. The bill would allow employers to offer health reimbursement arrangements (HRAs) without being subject to outrageous IRS fines. Joel White, president of the Council said, “We are in a race to the finish to save Americans’ health benefits.”

Many small business employers have reimbursed employees for individually purchased health coverage and related medical expenses through HRAs. But since July 1, the IRS has deemed these arrangements impermissible, fining employers that provide HRAs $100 per day, per employee. The ACA fine is one-eighteenth that sum for larger businesses that provide no coverage at all. White said, “With penalties that could amount to $36,500 per employee, or $500,000 total, employers will be forced to draw back their helping hands.”

ACA Reporting Could Be a Security Nightmare

Under the ACA, employers must now track and provide private healthcare information to the IRS, which could be a security nightmare, according to Greatland Corp. Starting this filing season, reporting is mandatory for any company with at least 50 full-time equivalent (FTE) employees. They must provide employees’ personal information from tax systems and health insurance information. This opens the door for simple errors, and could lead to misuse or abuse of personal information. Combining this information from two very different regulated databases and importing the data into the unfamiliar 1095 form can create security issues.

Employers use the 1095 form to report the offer of coverage to employees and to the IRS. The 1095 form requires data that is typically stored in the employer’s payroll system and HIPAA-protected benefit information. It is most often included in the employer’s HR software.

With the increase in filing regulations this tax season, Greatland has noted an increase in businesses claiming to offer these services. Often, these opportunistic companies fail to understand the detailed documentation; they don’t have the skills to navigate ongoing changes; and they don’t offer the software with security measures to keep the information safe.

Employers must send 1095 forms by the end of January. Because January 31 falls on a Sunday in 2016, statements must be mailed by February 1, 2016. Employers have until the end of February to provide this information to the IRS if filing paper forms or until the end of March if filing electronically. Employers with 250 or more forms must file them electronically. While incorrect filings will not be penalized for calendar year 2015 filing (reported in 2016), employers and insurers are still required to file on time and make a good faith effort to comply

The IRS Increases Deduction Limits for Long Term Care Insurance

A couple with tax-qualified long-term care insurance coverage could enjoy a maximum $9,500 tax deduction in 2015. The potential tax deduction increases to $9,740 in 2016 according to a just-released IRS revenue procedure. “The potential tax deductibility of tax-qualified long-term care insurance costs is one of the most overlooked benefits, especially for older retired Americans,” states Jesse Slome, director of the American Association for Long-Term Care Insurance (AALTCI).

The IRS permits deductions for long-term care insurance policies that meet certain eligibility standards. Life insurance policies that offer a long-term care benefit are generally not eligible for a tax deduction. The allowable maximum deduction is based on the policyholder’s age before the end of the taxable year. A couple ages 64 and 66 could be eligible to deduct $3,800 each from their 2015 taxes. The deduction may be possible even if they paid for the policy now before the end of the year.

For 2016, the IRS approved a 2.5% increase. “This is a positive indication of the government’s commitment to encourage more individuals to do some planning. The government recently announced that 60 million people on Social Security will not receive any cost-of-living increase in their 2016 benefits,” he said. Tax-deductible limits for long term care insurance premiums vary by age. The 2015 limit for someone age 55 is $1,430 in 2015 (increasing to $1,460 in 2016).

Slome notes, “You likely will not qualify for a tax deduction while you are still working but you could benefit when you are retired. After retirement, your income is low; the age-based tax deductible maximum limit for long term care insurance is high; and your ability to deduct costs is more likely and much more valuable.”
Slome contends that few individuals are aware of the tax deductibility of long-term care insurance premiums, “We find most people are completely unaware of the opportunity and rules that apply for individuals and self-employed individuals.”

Certain owners of businesses are able to take advantage of special rules that apply to tax qualified long-term care insurance. A small business, established as a C-corporation may be able to deduct the full cost of long term care insurance premiums, even if the cost is above the stated yearly tax limits. Plus, the company can designate who is covered even when the employer pays the full cost.

While deductions may not apply for individuals who are still working, they often can be taken during retirement when income stops and medical expenses often occur. The 2015 and 2016 deductible limits under Section 213(d)(10) for eligible long-term care premiums includable in the term ‘medical care’ are as follows

The Cadillac Tax Is Causing Employers to Eliminate HSA Contributions

Many employers with plan costs close to the Cadillac Tax threshold are eliminating payroll contributions to HSAs to avoid incurring excise tax liability, even though many HSA-qualified plans are likely to avoid the tax for years, according to a study by The American Bankers Assn through its Health Savings Accounts Council and HSA Consulting Services.

In a recent letter to the IRS, the HSA Council said that employee contributions should be excluded from the excise tax calculation. HSA plans have proven effective in increasing health and wellness behaviors while decreasing healthcare costs and enabling Americans to save for healthcare and retirement expenses, according to the Council.

Kevin McKechnie, executive director of ABA’s HSA Council said that many HSA-qualified plans are expected to remain under the initial Cadillac Tax threshold, but employers in expensive states or with expensive plans may incur tax liability in 2018. The tax is calculated monthly. Employers who contribute large amounts in one month to help employees seed accounts may need to spread contributions over a plan year in order to avoid the tax.

There is a very large premium variance among states. HSA plans in Connecticut are likely to be affected right away while Iowa plans appear to be safe for years to come.

Todd Berkley, president of HSA Consulting Services, the author of the study said, “We initially set out to prove that HSA plans would steer clear of the tax, but are dismayed to find some plans will be hit right away if payroll contributions are counted. While many HSA plans will likely be a safe haven for now, like the AMT, this tax will eventually affect every plan in America, including HSA plans.”

Health plans for expats excluded from ACA tax, IRS says

Expatriate health insurance plans are excluded from the Affordable Care Act’s health insurance tax, according to the IRS. The IRS rule defines expatriate health plans as “group health insurance policies that provide coverage to employees, substantially all of whom are working outside their country of citizenship; working outside their country of citizenship and outside the employer’s country of domicile; or non-US citizens working in their home country.” (4/1)

Some taxpayers will get special ACA open enrollment period

Uninsured tax filers in states using the federal exchange who were unaware they would be penalized for not having health insurance will get another chance to enroll, the Obama administration announced. The special enrollment period will be from March 15 to April 30. The IRS is also sending new forms to about 800,000 tax filers to correct subsidy errors. Reuters (2/20), The Washington Post (tiered subscription model)/Wonkblog (2/20)

Californians Received an Average of $5,200 Per Household Through Covered California

About 800,000 California households got federal subsidies to make health care more affordable in 2014. The average amount received was more than $5,200 per household per year, or about $436 per month, according to Covered California executive director peter V. Lee. He said, “It’s important for uninsured Californians to know that many people like them received more than $5,200 last year to help them purchase health coverage, and that support is available to many others eligible to sign up before February 15.”

The total amount of premium help  — known as the federal Advanced Premium Tax Credit (APTC) — was $3.2 billion paid to health insurance companies on behalf of those who enrolled in private coverage through Covered California in 2014. The consumers themselves paid $1.1 billion toward those policies in 2014, meaning that for every dollar a subsidized consumer spent on premiums, the federal government paid another $3.

The data released Monday are reflected on new Health Insurance Marketplace Statements being mailed this week by Covered California. Known as Internal Revenue Service (IRS) Form 1095-A, the two-page statement ( will show the amount of Advanced Premium Tax Credit each household received on a month-by-month basis in 2014. Similar to other tax documents, like a W-2 or 1099, the 1095-A will be used by consumers when they file their federal tax returns this year to ensure the subsidy they received is appropriate.

Consumers need to use this information when they file their taxes for 2014, Lee said. For many consumers, their tax credit will need to be adjusted, because their income is different than what they estimated it would be for 2014. As a result, consumers will see their tax credit adjusted upward or downward in their tax return based on their actual income as reported to the IRS for 2014.

Under the Affordable Care Act, the amount of tax credit reducing the consumer’s monthly health insurance premium payment is based on an estimate of their income made when they purchase their insurance. Consumers pay their share of the premium to the insurance company, and the federal government pays a portion on their behalf, based on their estimated income in the year ahead. The amount paid by the government is called the Advanced Premium Tax Credit, because it is paid in advance but reconciled as a tax credit at tax time based on the consumer’s official income as reported to the IRS. Consumers can elect to wait to get the entire tax credit at the end of the year, but almost all consumers took their premium tax credit in advance.

Many tax preparers and commercial tax software products are ready to accept information from Form 1095-A. Consumers may be able to get free software or in-person help filing their taxes and can learn more at or

The period to sign up for coverage for 2015 continues for the next three weeks until February 15.  In addition to premium help, many consumers also benefited from cost-sharing reductions that lowered their out-of-pocket costs when they visited the doctor, Lee said.

In 2014, more than 60% of consumers who received subsidized coverage through Covered California qualified for cost-sharing reductions, which reduced their out-of-pocket health care expenses. Lee said that in 2014, the value of the out-of-pocket discounts per household amounted to about $1,200 per year.

Last Updated 05/25/2022

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