The ACA Individual Mandate and Your Tax Return
The Affordable Care Act requires individuals, their spouses and dependents to have qualifying health care coverage for each month of the year; to qualify for a health coverage exemption; or to make an Individual Shared Responsibility Payment when filing their federal income tax return.
Individuals who had coverage for all of 2015 will simply check a box on their tax returns to report that coverage.
Those who don’t have qualifying health care coverage, but meet certain criteria, may be eligible for an exemption from coverage. Most exemptions are claimed when taxpayers file their tax returns, but some must be claimed through the Marketplace.
If taxpayers or any of their dependents are exempt from the requirement to have health coverage, they should complete IRS Form 8965, Health Coverage Exemptions and submit it with their tax return.
However, those who are not required to file a tax return do not need to file a return solely to report their coverage or to claim an exemption.
For any months when they did not have coverage or qualify for a coverage exemption, they must make a payment called the individual shared responsibility payment.
If these individuals could have afforded coverage for themselves or any of their dependents, but chose not to get it, and they do not qualify for an exemption, they must make a payment.
To calculate the shared responsibility payment, taxpayers can use a worksheet included in the instructions for Form 8965, and enter the payment amount on their tax return.
Individuals or their tax professionals can prepare and file tax return electronically whether they simply check the box on the tax return to indicate they had coverage in 2015, claim a health coverage exemption, or make an individual shared responsibility payment.
The IRS said that using tax preparation software is the best and simplest way to file a complete and accurate tax return, as it guides individuals and tax preparers through the process and does the math. Electronic filing options include IRS Free File for taxpayers who qualify, free volunteer assistance, commercial software, and professional assistance.
To determine whether an individual is eligible for a coverage exemption or is liable for the Individual Shared Responsibility Payment, use the Interactive Tax Assistant on IRS.gov.
To learn more about ACA compliance in 2021, click here.
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