Friday, March 18, 2016

MISTAKE #6: Forgetting About Form 1095-A


Top Tax Return Mistakes Made By Self Preparers



When a taxpayer enrolls in health insurance through Healthcare.gov or a state health insurance exchange, they'll receive Form 1095-A, a Health Insurance Marketplace Statement. All of their health insurance costs and coverage are reported on the 1095-A, along with any Affordable Health Act subsidies that they received. 

In a letter to Congress, the IRS commissioner said that about one third of taxpayers who received Advance Premium Tax Credits didn’t report the credit on their 2014 tax return.  When a taxpayer enrolls in health insurance through the healthcare marketplace or a state exchange, they can estimate their income for the upcoming year, and if they qualify, they can receive an advance payment of a healthcare subsidy to help reduce the monthly cost of insurance.

At the end of the year, they need to submit Form 8962 to reconcile that credit with their actual income. If they underestimated their income, they might need to pay some of that healthcare subsidy back. If they overestimated their income, they might be entitled to more of a credit. That calculation occurs on Form 8962.

If you received an insurance subsidy through the health insurance marketplace and do not file Form 8962, then the IRS will demand that you send Form 8962 to them. They’ll delay your refund until you send it, too. Form 8962 isn’t too hard to fill out with the help of tax preparation software – but if you forget to report your subsidy and then try to do Form 8962 by hand, it can be a difficult form to complete.


There’s a different problem hidden within the commissioner’s comments, too. There are many taxpayers who purchased health insurance through the marketplace, but did not receive the Advance Premium Tax Credit. Some of them are eligible for that subsidy and could claim it on their tax return. In order to do that, they too would need to fill out Form 8962. If one third of people who definitely have to file Form 8962 aren't doing it - how big is the percentage of people who don't need to fill it out, but probably should and are missing out on a credit? Unfortunately, the IRS isn't rushing out to remind taxpayers to check their qualifications for these unclaimed subsidies.

Coming up next: Mistake #7 - Not Filing

Read About Mistake #5

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