What Form 8965 (2014) Is For
Form 8965 is used to report exemptions from the individual mandate under the Affordable Care Act when a taxpayer or household member did not have minimum essential coverage for part of the year. It applies to individuals whose health insurance coverage did not meet ACA-compliant standards, including those relying on short-term health insurance, dental-only plans, vision-only plans, or hospital indemnity policies. The form supports taxpayers who received care through programs such as a Health Care Sharing Ministry, Refugee Medical Assistance, or state plan benefits.
The form helps the IRS determine why a taxpayer should not owe a shared responsibility payment under section 5000A(f)(1). It covers various types of coverage, including employer-sponsored plans, Medicare Part A, Medicaid coverage, Children's Health Insurance Program benefits, TRICARE plans, Veterans' health care benefits, and marketplace plans from exchanges such as Maryland Health Connection or Connect for Health Colorado. Form 8965 is required when these programs did not apply or when health insurance plans failed to meet minimum value standards.
When You’d Use Form 8965
A taxpayer uses Form 8965 when at least one household member lacked minimum essential coverage for any month of 2014. This includes individuals without access to job-based plans, enhanced MEC plans, standard MEC plans, or private health plans approved by the federal government. It also applies when Marketplace subsidies, Premium Tax Credit eligibility, or employer-sponsored insurance options were not available.
The form is also used when an individual's income level prevents them from affording health insurance premiums or when coverage was unavailable during open enrollment or a special enrollment period. Taxpayers may also use the form if they qualify for exemptions based on residency abroad, being categorically needy or medically needy for Medicaid, or participating in Veterans Administration and Veterans Affairs programs. Late or amended filings require attaching Form 8965 to a Form 1040X when corrections are needed.
Key Rules or Details for 2014
Minimum essential coverage for 2014 includes Medicare Part A, Medicaid state plan benefits, Children's Health Insurance Program coverage, employer-sponsored insurance, and marketplace plans offered through the Health Insurance Marketplace. Coverage that does not satisfy these requirements includes short-term plans, dental-only plans, vision-only plans, and certain emergency medical conditions or emergency services programs. The Centers for Medicare & Medicaid Services and state governments provide guidance on which benefit package types qualify.
Exemptions apply when health insurance premiums exceed affordability limits, when a taxpayer’s income level is below the filing requirement, or when life events prevent enrollment. Exemptions may also apply to individuals receiving Medically Needy Medicaid, participating in a Health Care Sharing Ministry recognized by the Social Security Administration, or relying on family planning services, tuberculosis-related services, or other limited programs. Some exemptions require Marketplace approval through a certificate of coverage or proof of lack of minimum essential coverage.
For more resources on filing or understanding prior-year IRS forms, visit our Form Summaries and Guides Library or see our IRS assistance guide.
Step-by-Step (High Level)
Step 1: Confirm minimum essential coverage
Review each person’s health insurance plans for every month of 2014. Coverage counts if it meets ACA-compliant standards, including Medicare Part A, employer-sponsored plans, TRICARE plans, Veterans Administration programs, or marketplace plans. Coverage that does not qualify includes short-term plans, dental-only plans, vision-only plans, and hospital indemnity policies.
Step 2: Identify any exemptions available
Exemptions may be available for individuals who meet specific criteria, including those with affordability concerns, low income levels, short coverage gaps, membership in federally recognized religious groups, foreign residency, or incarceration. Exemptions also apply when individuals receive Medically Needy Medicaid, state government medical benefits, or other coverage that does not meet minimum essential coverage standards.
Step 3: Determine whether a Marketplace exemption is required
Some exemptions must be requested through the Health Insurance Marketplace. These include certain hardship exemptions and exemptions requiring proof of lack of minimum essential coverage. The Marketplace may request documents such as a certificate of coverage, an audit statement, or evidence of lack of minimum essential coverage. The Marketplace typically sends an email receipt once the application is submitted.
Step 4: Complete the correct part of Form 8965
Form 8965 contains three parts. Part I reports Marketplace-granted exemptions, including those tied to special enrollment period restrictions. Part II applies to income-based exemptions for households with incomes below the filing thresholds. Part III covers other exemption categories and requires the specific payer to specify the months to which they apply.
Step 5: Calculate the Shared Responsibility Payment
If uncovered months remain after applying exemptions, use the Shared Responsibility Payment Worksheet in the instructions to calculate the payment. The IRS uses income level, family size, and affordability rules based on actuarial value and plan premiums.
Step 6: File the tax return and attach Form 8965
Form 8965 must be attached to the tax return, whether the taxpayer files electronically or by mail. Paper filers may be directed to send documents to locations such as P.O. Box 249 or other IRS mailing addresses, depending on the state in which they reside.
For more information about IRS assistance, including help with your tax questions and payment options, see this comprehensive guide.
Common Mistakes and How to Avoid Them
- Filing multiple Forms 8965 for one household: Submit only one form for everyone listed on the tax return to avoid duplicate filings or processing delays.
- Misunderstanding what qualifies as minimum essential coverage: Verify that your plan is ACA-compliant, since short-term policies, limited-benefit coverage, and certain emergency services do not meet the requirement.
- Entering exemptions in the wrong section: Report Marketplace exemptions in Part I, income-based exemptions in Part II, and all other qualifying exemptions in Part III.
- Miscalculating household income for exemptions: Include dependent income when required and understand Medicaid categories, including medically needy and categorically needy programs.
- Failing to mark pending Marketplace exemptions: Indicate pending status on the form when an exemption application is unresolved to ensure accurate processing.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
The IRS reviews Form 8965 to confirm exemptions were applied correctly for months without minimum essential coverage and then processes the return normally. The agency may request documents such as a Marketplace certificate, audit statement, or Proof of Lack of Minimum Essential coverage if clarification is needed about types of coverage or income level. Taxpayers who receive notices about Health Insurance Marketplace submissions or ACA-compliant health coverage may seek help from tax experts or TurboTax Live Full Service.
FAQs
Can a taxpayer use Form 8965 if enrolled in a Health Care Sharing Ministry?
Yes, membership in a qualifying ministry is an exemption category, but it must meet federal eligibility requirements.
Does enrollment in Medicare Part B qualify as minimum essential coverage?
No, Medicare Part B alone does not qualify as minimum essential coverage. Medicare Part A is necessary.
Does Medicaid coverage meet the minimum essential coverage rule?
Yes, Medicaid state plan benefits, medically needy Medicaid programs, and categorically needy coverage qualify.
Can short-term plans meet the individual mandate?
No, short-term health insurance does not satisfy minimum essential coverage requirements.
What should a taxpayer do if a Marketplace exemption is still pending?
The taxpayer can enter “pending” in Part I and file the return on time.
Does foreign residency qualify someone for an exemption?
Yes, taxpayers who meet foreign residency rules or physical presence tests qualify.
Do emergency services qualify as minimum essential coverage?
No, emergency medical conditions or emergency-only services do not meet the minimum essential coverage requirements.
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