Hey, health insurance stragglers, this is your moment. Obamacare’s second open-enrollment period ends Feb. 15, which is the last day to apply for health coverage for 2015 from Covered California or the private market. (That is, unless you experience a major life change such as the birth of a child, divorce or job loss, which would trigger a special enrollment period.)
Some of you aren’t straggling. You’ve chosen to remain uninsured because of cost, political opposition to the Affordable Care Act or another reason.
But remember, your choice has consequences. And they’re coming due. If you didn’t have coverage last year and don’t qualify for one of the exemptions that I wrote about in my previous column, you will owe a penalty with your taxes.
Question: I have Medi-Cal. Does it qualify as health insurance under Obamacare to avoid the penalty when I file my 2014 income tax?
Answer: Yes, if you had Medi-Cal, which is publicly funded health insurance for low-income Californians, you don’t have to pay the Obamacare tax penalty. Same goes for Medicare, job-based insurance, and insurance you buy from Covered California and the private market. Plus some others.
For everybody else, the tax for last year is $95 per adult and $47.50 per child (with a family maximum of $285), or 1% of annual household income, whichever is greater.
For this year, the penalty rises to $325 per adult and $162.50 per child (with a family maximum of $975), or 2% of annual household income, whichever is greater.
(To estimate your tax, visit the Tax Policy Center’s penalty calculator at www.taxpolicycenter.org.)
Please don’t discount “whichever is greater.” Those words mean that your penalty could climb into the hundreds or thousands of dollars.
If you’re one of those people who already owes for 2014 and you don’t yet have insurance for 2015, you can avoid a double tax whammy if you act fast.
Q: I received a 1095-A from Covered California that reports the amount of tax credits I received last year. What do I do with this?
A: Covered California has mailed the new 1095-A tax forms to about 800,000 California households.
But beware: The agency included incorrect information on about 100,000 of them. In those cases, “the information that we have in our records did not match what was in the health plans’ records,” says Dana Howard of Covered California. “We are reconciling that and issuing revised 1095s.”
The agency sent emails and postcards to affected households notifying them that revised 1095-A forms are on the way, Howard says. They should arrive by mid- to late-February.
You’ll need those forms — the accurate ones — to complete your 2014 taxes.
Remember back when you first enrolled in a Covered California plan for 2014? You were asked to estimate your 2014 income, which is a difficult task for anyone, let alone freelancers, self-employed folks and others who don’t have salaried jobs.
Now that it’s tax time, you get to figure out whether your actual 2014 income varied from your estimate, because that will determine how much tax credits you were due. (And wouldn’t you know it, the definition of income for Obamacare tax credit purposes isn’t merely your adjusted gross income. It requires a unique calculation.)
Most of you received your tax credits in advance, so if your actual income varied from your estimate, you will either owe or be owed money.
“We’re going to have to sit down with clients and have a lot of aspirin and tissues on the table,” says Michael Eisenberg, a certified public accountant with Miller Ward & Company in Encino. “There are a lot of people who are going to be upset.”
It’s not just income that can affect your credits. Tax experts point to other potential minefields:
•Big life changes:
If you got married, had a baby, got divorced or experienced some other seismic shift, that could affect your tax credit totals.
Some people in those situations informed Covered California. Others didn’t.
“You can change the tax credits when your situation changes,” Eisenberg says. “But the issue is, were people aware that they should have called Covered California to change their credits?”
For example, if you and your spouse divorced without informing Covered California, “there’s a very complex calculation for how to split that credit and the income,” says Laura Strombom, owner of All About Numbers, a tax preparation business in Stockton.
Sometimes, the people you think are dependents aren’t. Or vice versa. Either of those scenarios could affect tax credits.
“There are an awful lot of people who believe that since their kid lives in the house, they’re a dependent,” Strombom says. “That oftentimes is not the case.”
Or, let’s say you have a dependent child in college who has a job and received a W-2 form. Even if that child files his or her own taxes, you still have to count that child’s income as part of your household income for purposes of the Obamacare tax credit, Strombom says.
There are many other potential pitfalls and complications. Rather than get into them, my primary advice is to get help from a tax professional.
I’m sorry to suggest something that isn’t free, but it could prevent you from making a costly mistake.
“Do not try and do this return by yourself,” Eisenberg says. “It is outrageously complex.”