What Form 8965 (2015) Is For
IRS Form 8965 is used to claim health coverage exemptions for taxpayers who did not maintain minimum essential coverage for all of 2015 under the Affordable Care Act. It applies when a taxpayer or household member lacked health insurance coverage and may qualify for exemptions based on income status, financial hardship, or Marketplace approval. The form helps reduce or eliminate the shared responsibility payment reported on a federal income tax return, such as Form 1040.
The form supports situations where health plans were unavailable, unaffordable, or disrupted by personal circumstances. It includes exemptions for members of a Health Care Sharing Ministry, federally recognized tribes, and individuals eligible for Medicare Part A, Medicaid Services, the Children’s Health Insurance Program, or other qualified health care programs. Marketplace-issued exemptions require an Exemption Certificate Number from the Health Insurance Marketplace.
When You’d Use Form 8965
Taxpayers use Form 8965 when filing a 2015 tax return and reporting months without health insurance. This includes individuals who missed open enrollment, had gaps in coverage despite employer-sponsored health plans, or could not afford marketplace plans, catastrophic coverage, or other health plans. Individuals filing Form 1040, Form 1040-NR, Form 1040-NR-EZ, and certain state tax return equivalents may also need the form.
Late or amended filers use Form 8965 to correct previously filed returns when an exemption was missed or approved after the return was filed. If a Marketplace exemption is granted later, the taxpayer may amend a return using Form 1040X and attach updated information, including any required Social Security details and Marketplace Coverage documents. Taxpayers may also use the form when eligible for the Affordability Exemption or other ACA Exemption categories.
Key Rules or Details for 2015
Household income determines eligibility for many exemptions. If a household's income falls below the filing threshold, a full-year exemption applies, eliminating the tax penalty for not having coverage. Minimum essential coverage includes Medicare Part A, Medicaid Services, marketplace plans, employer-sponsored plans, multi-employer plan coverage, self-insured plans, and specific programs through the Indian Health Service.
Some exemptions require Marketplace approval, such as hardship exemptions or exemptions for members of a federally recognized tribe. Others, including the short coverage gap or affordability exemption, can be claimed directly. Coverage sources across the District of Columbia, Covered California, Rhode Island, and other insurance marketplaces must also meet essential health benefits rules.
For more information about IRS assistance, including help with your tax questions and payment options, see this comprehensive guide.
Step-by-Step (High Level)
Step 1: Determine Filing Requirement
The taxpayer confirms whether they or anyone in their household lacked minimum essential coverage for any month in 2015. If full-year coverage was maintained, Form 8965 is not required.
Step 2: Gather Documentation
The taxpayer collects Forms 1095-A, 1095-B, and 1095-C, as these documents show health insurance coverage for each household member. If a Marketplace exemption was granted, the Exemption Certificate Number must be available.
Step 3: Complete Part I
If a Marketplace exemption was granted, the taxpayer reports the individual’s information, Social Security Number, and the Exemption Certificate Number. If approval is pending, the taxpayer may enter “pending.”
Step 4: Review Income Thresholds
The taxpayer reviews the filing threshold for 2015. If household income or gross income is below the threshold, the full-year exemption applies to all household members.
Step 5: Complete Part III if Needed
The taxpayer completes Part III for individuals who need exemptions for specific months. Each exemption code is listed with the corresponding months.
Step 6: Calculate Shared Responsibility Payment
If exemptions do not cover all months without coverage, the taxpayer calculates the shared responsibility payment using the worksheets in the Form 8965 instructions. The payment cannot exceed the national average premium for a bronze-level plan.
Step 7: Attach the Form
The taxpayer attaches Form 8965 to Form 1040 or any other required income tax return for the year.
Common Mistakes and How to Avoid Them
- Filing Form 8965 when it isn’t required: If you had full-year minimum essential coverage, simply check the full-year coverage box on your tax return instead of filing the form.
- Overlooking the filing-threshold exemption: Compare your household income to the annual filing threshold to claim the full-year exemption and avoid unnecessary penalty payments.
- Using incorrect or missing exemption codes: Enter the proper exemption code in Part III to prevent processing delays and avoid IRS requests for clarification.
- Not using the full-year exemption box when eligible: Check the full-year box when an exemption applies for all twelve months rather than listing each month separately.
- Miscalculating the shared responsibility payment: Follow worksheet instructions carefully, including family maximums and income calculations, to ensure an accurate payment amount.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
Once Form 8965 is filed with a U.S. Individual Income Tax Return, the IRS reviews the exemption claims to determine whether the shared responsibility payment should be reduced or eliminated. If exemptions are valid, the taxpayer’s federal penalty amount is adjusted automatically. Refunds or balance due amounts on the income tax return reflect these changes.
If clarification is needed, the IRS may send notices requesting confirmation of Social Security information, Marketplace approvals, or supporting documents such as Forms 1095-A, 1095-B, or 1095-C. Taxpayers should keep medical expenses documentation, premium tax credit statements, and any Exemption Certificate Number records for at least three years. Those who used tax experts, such as H&R Block or TurboTax Live Full Service, or other preparers should ensure that all ACA-related details were included correctly.
FAQs
Can a taxpayer claim an affordability exemption?
Yes, if the lowest-cost plan available costs more than 8.05% of the household income, the taxpayer may claim the affordability exemption.
Can a short coverage gap be exempt?
Yes, the short coverage gap applies if the gap is less than three consecutive months.
Are Marketplace approvals required for all exemptions?
No, some exemptions require Marketplace approval, but others can be claimed directly on the tax return.
Can different household members have different exemptions?
Yes, exemptions may apply differently to different individuals depending on their circumstances.
Can a taxpayer amend a return to claim an exemption?
Yes, a taxpayer may file an amended return with Form 1040X and attach a corrected Form 8965 to claim a missed exemption.
For more resources on filing or understanding other IRS forms, visit our Form Summaries and Guides Library.
