Are the Health Coverage and Tax Credit Details for Filing 1040s Really That Complex?

By Clive Riddle, February 12, 2015

Much attention has been given this tax season to the new intricacies involved with filing health coverage and related tax credit information for individual 1040s. H&R Block and many other tax services have taken the opportunity to nationally advertise their expertise to support tax filers this season.

So the question begs, how complex are they? This month’s issue of Health Insurance Marketplace News tackles that issue in their February Thought Leaders Corner, asking the question: “ Are the tax credit and related health coverage filing details required for individual 1040s really that complex, and do you feel there is adequate IRS guidance?”

Here’s what some Health Insurance Marketplace News panelists had to say:

“If 2014 premiums based on 2012 incomes prove to be different from actual 2014 incomes and the government seeks to claw back what proved to be excessive subsidies and compensate for too-low subsidies, it will prove to be very complex in practice and generate much paperwork and frustration. Also, if people were covered for only part of the year, the filing will be complex. Better if the subsidies were fixed dollar amounts not subject to retroactive adjustment.” Alain C. Enthoven PhD, Marriner S. Eccles Professor of Public and Private Management (Emeritus), Knight Management Center, Stanford University, Stanford CA

“My initial response to the tax filing requirements in a Health Affairs blog was to express a concern that the filing requirements for the individual responsibility penalty and for premium tax credit reconciliation were very demanding and would probably require most tax filers who were affected by either issue to use the help of tax preparers. Since then, the IRS and CMS have taken a number of steps to help taxpayers -- allowing taxpayers in states that did not expand Medicaid with incomes not exceeding 138% of the poverty level to claim an exemption on their taxes, offering calculators at Healthcare.gov that will allow tax filers to determine the premiums of the lowest-cost Bronze plan and second-lowest-cost Silver plan that would have been available to them and offering free tax filing software to most tax filers. It is still not going to be easy, but this should be manageable for most tax filers.”  Timothy S. Jost Esq., Robert L. Willett Family Professorship of Law, Washington and Lee University School of Law, Lexington VA

“Tax filing details are often complex. Adding anything associated with the ACA won’t make it any easier. If filers receive ACA-related IRS guidance primarily through written documents versus from a knowledgeable professional or through another more ‘modern’ approach to communication and education, it may be a real challenge for many to fully understand and timely and properly complete the required information. This could be seen as an outstanding opportunity for the various parties close to the ACA that have observed so much about the importance of consumer-level communication and education to work together to assist the IRS in its endeavor. There are some useful resources available, but accessing and understanding those resources may continue to be a challenge that must be continuously addressed to ensure consumers are knowledgeable about, and compliant with, the law.”   Simeon Schindelman, CEO, Bloom Health, Minneapolis, MN

“Yes, most consumers will find it very confusing and yes, there is sufficient IRS guidance. Consumers will fall into two broad categories; either they received a tax credit for 2014 tax year or did not.

(1) Did not receive tax credit:  Form 1040EZ. Easiest to file with some restrictions (e.g., claim no dependents and do not want to claim any advance payments of the premium tax credit); and (2) Received and will claim advance payments of the premium tax credit:   Form 1040A. Has some restrictions (e.g., do not itemize deductions, claim standard deductions and taxable income or $100K or less);  Form 1040. Filed for taxable income of greater than $100K (e.g., can itemize deductions);      Form 8962 for premium tax credit, irs.gov/pub/irs-pdf/f8962.pdf; the 1095-A is required when filling out Form 8962 to claim premium tax credits. If consumers had private health insurance or had self-insured employer coverage or coverage through a government program (e.g., Medicaid or Medicare) they may receive a 1095-B. If consumers had health insurance through a large employer that had an employer-sponsored plan, they may receive a 1095-C. However, 1095-B and 1095-C are optional for 2014 tax year, which means it's unlikely most folks will receive one. Unfortunately, if consumers didn’t have or maintain coverage, they will have to get an exemption or make a payment with their federal income tax return.”  Peter B. Nichol, Director, IT/Head of IT , Access Health CT , Hartford, CT

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