What Form 8965 (2016) Is For
IRS Form 8965 is used to claim health coverage exemptions for tax year 2016 under the Affordable Care Act when someone in the household did not have qualifying health insurance. It helps taxpayers avoid the Individual Shared Responsibility Payment by documenting approved Coverage Exemptions tied to household income, affordability, or hardship exemptions. The form supports individuals who could not maintain health coverage due to income limits, insurance gaps, or marketplace decisions.
This form is filed with Form 1040 when submitting an income tax return and uses information from 1095 Forms such as Form 1095-A, Form 1095-B, and IRS Form 1095-C. Taxpayers use the form when insurance coverage is missing for one or more months, and they qualify for exemptions under Section 5000A. It is not required for individuals who have full-year health insurance plans that meet minimum essential healthcare standards.
When You’d Use Form 8965
A taxpayer uses Form 8965 when someone in the tax household lacks insurance coverage and qualifies for an insurance exemption. This includes situations involving the affordability exemption, hardship exemptions, short-term insurance gaps, or income below the filing threshold. It may also apply when a taxpayer receives Marketplace information tied to premium subsidy eligibility.
The form is also used for late or amended filings when correcting mistakes on a previous tax return. Taxpayers may file an amended return if a Marketplace exemption is approved later or if they discover that their yearly income or monthly income was below the filing threshold. Individuals filing past due returns for tax year 2016 follow the same rules if they need to document health insurance gaps.
Key Rules or Details for 2016
Key rules for Form 8965 involve calculating household income to determine whether a taxpayer qualifies for a full-year exemption. If income falls below the filing threshold or health insurance plans are unaffordable, the federal rules allow exemptions under Section 36B or Section 1411. Taxpayers must review Form 1095s and consider employer insurance, as well as full-time and variable-hour employees, under the Employer Shared Responsibility Provision.
Certain exemptions require approval from the Health Insurance Marketplace, particularly those related to the Federal Poverty Level or open enrollment limits. Others, such as short-term insurance gaps or affordability issues, can be claimed directly on the tax return. Taxpayers using accounting software or an Intuit account may need to sign in or complete a software update before submitting the form electronically.
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Step-by-Step (High Level)
Step 1: Gather your documents
Collect your 1095 forms, marketplace exemption letters, and income records for tax year 2016. Verify the months of health insurance coverage for everyone in your tax household.
Step 2: Identify who needs an exemption
Review which household members lacked insurance coverage and determine if a Health Coverage Exemption applies. Check for affordability issues, hardship exemptions, or gaps in your short-term insurance coverage.
Step 3: Complete Part I for Marketplace approvals
Enter Marketplace-approved exemptions in Part I using the Exemption Certificate Number. Verify that each exemption is associated with the correct person and coverage months.
Step 4: Complete Part II for income-based exemptions
Use Part II if your household income is below the filing threshold or meets Federal Poverty Level rules. Confirm whether this provides a full-year exemption from the shared responsibility payment.
Step 5: Complete Part III for month-specific exemptions
Fill out Part III to report exemptions that apply only to certain months or individuals. Use the correct exemption codes and record all months with missing insurance coverage.
Step 6: Attach the form and file your tax return
Attach Form 8965 to your Form 1040 before submitting your tax return. Review all entries for accuracy and keep copies of your forms, tax records, and Marketplace documents.
Use our IRS Account Transcript Service to confirm the processing status of your amended return and maintain accurate corporate tax records.
Common Mistakes and How to Avoid Them
- Claiming exemptions when full-year coverage was already provided: If everyone in the household had qualifying health insurance for the entire year, simply check the full-year Form 1040 instead of filing Form 8965.
- Miscalculating household income or filing-threshold eligibility: Review both annual and monthly income and compare it to the filing threshold to determine whether an exemption applies.
- Entering incorrect exemption codes or marking the wrong months: Use the correct code from the instructions and review Forms 1095-A, 1095-B, and 1095-C that they received to verify accurate coverage information.
- Exemptions require Marketplace approval: Distinguish between exemptions requiring Marketplace approval and those claimed directly on the tax return to avoid unnecessary applications or missed exemptions.
- Misunderstanding employer insurance rules: Review IRS Form 1095-C and understand how Employer Shared Responsibility rules apply to full-time or variable-hour employees to ensure correct exemption reporting.
What Happens After You File
After filing Form 8965 with a tax return, the IRS reviews the exemptions based on the information provided. If all coverage exemptions meet the requirements, the return process is usually handled, and any refund is issued as usual. If information is missing or incorrect, the IRS may request documentation or adjust the return to include the shared responsibility payment.
Denying a Marketplace exemption or using an incorrect exemption code may require filing Form 1040X with updated information. Taxpayers may also need to reconcile the premium tax credit by reviewing the Form 8962 instructions, especially if they received Marketplace benefits or premium subsidies. Any issues related to insurance coverage or TAX TOOLS prompts may require contacting a tax preparer or using a Topic Search or Jump to option in the Tools window.
FAQs
Who must file Form 8965 for 2016?
A taxpayer who lacked health coverage for one or more months in 2016 and who qualifies for an exemption must file Form 8965.
Can a taxpayer file Form 8965 with an amended return?
Yes, Form 8965 may be filed with Form 1040X to correct exemptions that were missing or incorrect on the original return.
Does a short-term insurance gap require the form?
Yes, short-term insurance gaps may qualify for an exemption and must be reported using the proper exemption code.
Do Marketplace exemptions require an Exemption Certificate Number?
Yes, marketplace exemptions require an ECN, which must be reported in Part I of the form.
Off the form. What if the taxpayer received Form 1095-C from an employer?
Form 1095-C reports employer insurance offers. A taxpayer still files Form 8965 if an exemption applies.
Does Form 8965 connect with the premium tax credit?
Yes, taxpayers who received Marketplace assistance may also need to complete Form 8962.
For more resources on filing or understanding other IRS forms, visit our Form Summaries and Guides Library.
