Changing a job or losing a job usually means a change in health care coverage. The big change in 2014 was the folks now have an option to find health care coverage on their own through the Affordable Care Act/healthcare.gov website.
Now, in 2015, we get to find out how the subsidies and exemption provisions of the Affordable Care Act are working out. When filing taxes this year, all of us will need to document our health care coverage and indicate whether any state or federal subsidies received for health care coverage were appropriate based on the actual 2014 income reported on these tax forms.
One of the issues that will cause problems for folks on these returns or when signing up for individual health care coverage is whether their income was so low as to qualify them for a Medicaid plan if Wisconsin had actually opted for the Medicaid expansion.
Because Wisconsin did not expand Medicaid coverage, the healthcare.gov website may have prevented folks here is Wisconsin from signing up for coverage because they presumably should have signed up for Medicaid coverage had Wisconsin expanded that coverage. But, since Wisconsin did not expand Medicaid coverage, there was no actual Medicaid coverage available for folks caught in this Medicaid gap. The solution, announced by the IRS (look for the sections about Medicaid) is that there will be no penalties for lack of health care coverage. The Medicaid exemption can be had from both the healthcare.gov website or when filing a tax return with the IRS.
If you are granted a coverage exemption from the Marketplace, they will send you a notice with your unique Exemption Certificate Number or ECN. Keep this notice with other important tax information.
You will enter your ECN in Part I, Marketplace-Granted Coverage Exemptions for Individuals, of Form 8965 in column C.
If the Marketplace hasn’t processed your exemption application before you file your tax return, complete Part I of Form 8965 and enter “pending” in Column C for each person listed. If you claim the exemption on your return, you do not need an ECN from the Marketplace.
For a coverage exemption that you qualify to claim on your tax return, all you need to do is file Form 8965 with your tax return – you do not need to call the IRS or obtain the exemption in advance.
You will use Part II, Coverage Exemptions for Your Household Claimed on Your Return, of Form 8965 to claim a coverage exemption if your income is below your filing threshold and you choose to file to file a tax return. If you are not required to file a tax return and don’t want to file a return, you do not need to file a return solely to claim this exemption.
Other coverage exemptions may be claimed on your tax return using Part III, Coverage Exemptions for Individuals Claimed on Your Return, of Form 8965. Use a separate line for each individual and exemption type claimed on the return.
This chart shows the types of exemptions available and whether they must be granted by the Marketplace, claimed on an income tax return filed with the IRS, or either may be granted by the Marketplace or claimed on a tax return. For additional information about how to get exemptions that may be granted by the Marketplace, visit HealthCare.gov/exemptions.
Hat tip to Jason Huberty for spotting this info.