Reporting health insurance at tax time will involve more paperwork

When you’re filing your federal income taxes this year, expect more forms and more paperwork.

Blame the Affordable Care Act.

This year, people are supposed to receive one or more forms regarding the health insurance they either had or were offered in 2015.

The forms are similar to a W-2, which lists income earned in the previous year, according to the IRS.

The forms are supposed to help people fill out the health care information section on their income taxes. The IRS does not say how much more time filing will take as a result of these forms.

If, however, you chose not to purchase health insurance in 2015 even though you could have afforded it, you will be paying a penalty when you file your taxes.

The last day to enroll for government-sponsored health care for 2016 is Jan. 31. That won’t help you with this year’s taxes, but it could get you out of paying penalties next year.

Penalties for not having insurance have been rising since 2014, and in 2016, the penalties will increase substantially.

Local tax preparers, meanwhile, have been scrambling to stay current with the changes.

“We’ve spent hours upon hours in continuing education,” said Shalena Hatfield, a certified public accountant at Larson & Company, PA. “What’s even more taxing on tax preparers is they keep revising the rules and deadlines, causing software delays and confusion for clients.”

Hatfield answered a few questions about what you’ll be facing at tax time if you did not purchase health insurance last year.

The following information should not be relied upon when taking a position on your tax returns. If you think any of the following scenarios may apply to you, it’s best to consult a licensed certified public accountant for assistance.

If I had health insurance in 2015, what should I expect at tax time?

If you had health insurance last year, you should receive either Form 1095-A, 1095-B or 1095-C.

Form 1095-A is a document sent to people who enrolled in health insurance through the marketplace, and it lists month-by-month information about the coverage. People can expect to receive this form by Feb. 1.

Form 1095-B is a document from health insurers sent to those they cover, providing similar information.

Form 1095-C is a document from certain employers sent to certain employees regarding what coverage was offered. It is typically sent when employers offer “self-insured coverage” to their employees, according to the IRS.

People can expect to receive either or both Forms 1095-B and 1095-C by March 31.

If you are expecting to receive Form 1095-A, the IRS recommends waiting until you receive the form to file. Otherwise, you don’t have to wait until you receive a Form 1095-B or 1095-C to file your taxes.

You should not attach any of these forms to your tax return, as they are for informational purposes only.

How much can I expect to pay if I didn’t buy health insurance last year?

It depends.

Under the Affordable Care Act, if you can afford health insurance but chose not to purchase it, you have to pay a “shared responsibility payment” for every month you were uninsured. There are some exceptions, however.

You make that payment at tax time.

In 2015, the penalty is the higher of the following two amounts:

▪ 2 percent of household income in excess of the filing threshold for the individual/family, with a cap at the average national premium for a bronze-level plan sold through the marketplace.

▪ $325 per adult and $162.50 per child under 18, with a cap at $975.

According to the IRS, the maximum a single person will pay for 2015 is $2,484, and the maximum a family with five or more individuals will pay is $12,240, based on the national average premiums for bronze-level plans.

What is considered required minimum essential coverage?

Minimum essential coverage includes insurance employees purchase through their employers as well as various individual and government-sponsored health insurance plans.

That includes:

▪ Coverage purchased directly from an insurance company

▪ Coverage purchased through the Health Insurance Marketplace

▪ Health insurance provided through a student health plan

▪ Medicare Part A, Medicare Advantage, as well as most Medicaid coverage

▪ Most types of TRICARE coverage and comprehensive health care programs offered by the Department of Veterans Affairs

How can I avoid paying the penalties?

If you didn’t have health insurance in 2015 and don’t qualify for an exemption, you can’t get out of paying them in 2015.

But you can get health insurance in 2016.

The deadline for applying for health coverage through HealthCare.gov is Jan. 31.

Children of parents with health insurance are allowed to remain on their parents’ health insurance until they turn 26.

Employers with 50 or more full-time employees in 2015 are required to offer minimum essential coverage to at least 95 percent of employees and their dependents in 2016.

This story was originally published January 25, 2016 at 8:01 AM with the headline "Reporting health insurance at tax time will involve more paperwork."