Health Reform Law Has New Implications for Consumers and Their Taxes

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Update:  The Centers for Medicare & Medicaid Services (CMS) announced a new short-term special enrollment period from March 15 to April 30, 2015, giving people in 37 states more time to sign up for 2015 health insurance coverage through Healthcare.gov. Act soon to secure health care coverage for you and your family, and to avoid a tax penalty for 2015. For more information, click here. Check your state marketplace website for updates regarding state-run exchange special enrollment periods.

The Affordable Care Act (ACA) has created a new relationship between health care and taxes that few Americans fully understand.

Almost half (48 percent) of Americans don’t know they are required to report their health insurance status on their upcoming 2014 tax returns, according to the Intuit TurboTax® Health Survey, conducted by Harris Poll released today.

The health reform law requires all Americans to have health insurance coverage or pay a penalty, a provision of the law enforced through the tax system. When they file 2014 federal income tax returns, consumers will have to indicate if they had coverage throughout the year.

According to the survey, one in 10 Americans currently remains uninsured. While two-thirds of Americans say they understand that going without coverage can lead to a tax penalty, more than one-third (34%) aren’t unaware of that fact, according to the Intuit TurboTax® Health Survey findings. That means many of those who are currently uninsured are likely to be caught off guard at tax time.

What’s more, the survey found that nearly nine in 10 people (87%) mistakenly believe they can still buy health insurance for this year and avoid the penalty.

The health plans consumers select during this open enrollment period will take effect no sooner than January 1, 2015.

The cost of the tax penalty rises in 2015 from the greater of $325 per adult or 2% of taxable income, up from $95 per adult or 1% of income for 2014. For an uninsured individual with annual earnings of $42,000, that translates to a fine of $318.50 for 2014 and $637 for 2015.

Nearly half (45 percent) of those surveyed said they didn’t know about the financial assistance made available through the Affordable Care Act. The law includes tax credits to reduce health plan premium costs as well as cost-sharing assistance for people with lower incomes.

The survey also found that more than half (56 percent) of those without health insurance were also unaware that uninsured individuals who meet certain criteria can qualify for an exemption from the ACA tax penalty. About half of those who remain uninsured are expected to qualify for an exemption under the law.

People can determine if they’re eligible for a low-cost health insurance plan and what the tax penalty would be if they didn’t buy health insurance in 2015 with the use of free online tools such as TurboTaxHealth.com.

In addition, TurboTax has developed a free online tool — TurboTax Exemption Check — that enables people to quickly determine if they qualify for an exemption from the penalty and then apply for it online. A complete list of exemptions for which people may qualify is also available at Healthcare.gov.

 

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