Taxpayers that who purchased health insurance through the Affordable Care Act Marketplace in 2014 or failed to buy health insurance entirely may be surprised this tax season with unexpected expenses.
According to tax industry leader H&R Block, an estimated 3.4 million Americans that bought through the marketplace will owe money for advance premium tax credits they received throughout the year.
What is an advance premium tax credit?
The U.S. government has been providing financial assistance to some Americans to offset the monthly cost of the coverage on an advanced basis and is looking to collect from individuals that overestimated the amount of assistance they qualified for.
Since the advance premium tax credit is based on household income estimates, consumers might have underestimated their income at the time of purchase. Now that they know their actual household income, they must reconcile the difference and pay back any money owed.
What are some other tax woes to worry about?
Americans who chose to remain uninsured and don’t qualify for any exemptions are also facing tax penalties. Penalties range from $47 for a child, $96 for an adult and up to $285 per household, or 1 percent of household income. Uninsured individuals will be made to pay the higher amount of the two penalties.
Many individuals are under the false impression that a flat rate penalty applies across the board. They don’t realize that the penalty for not having health insurance is actually based on their household income.
Other taxpayers mistakenly believe they are exempt from the healthcare reform mandate and its penalties based on income levels, coverage gaps and other situations, but fail to apply and receive approval for exemption status.
How do I avoid tax gauges and healthcare penalties?
It is strongly encouraged that individuals and families without coverage speak with a qualified insurance agent certified by the Marketplace. They can provide you with all the information and resources you need to determine if you qualify for exemption status or a lower penalty. Furthermore, they can assist you with finding appropriate coverage so you can avoid the penalties in 2015.
While it is too late for many taxpayers to avoid the penalties for going uninsured in 2014, the Individual Open Enrollment Period is still open through February 15 for those looking to obtain coverage.