Instructions for Form 8965 Checklist: 2016 Tax Year
Form 8965 reconciles individual shared responsibility payment liability under the Affordable
Care Act for tax year 2016. Taxpayers use this form to report or claim a coverage exemption if they or their dependents lacked minimum essential coverage for one or more months during the year. The form functions as a supporting schedule to your income tax return and must be attached to Form 1040, Form 1040A, or Form 1040EZ when filing your 2016 tax return. The
Internal Revenue Service requires disclosure of coverage gaps even when you qualify for an exemption.
Who Must File Form 8965
You must file Form 8965 if you are filing a federal income tax return and you cannot be claimed as a dependent by another taxpayer. Filing requirements apply when you, your spouse, or anyone in your tax household did not have health insurance coverage for one or more months in
2016.
Understanding Form 8965 Structure
The 2016 Form 8965 contains three distinct parts that serve different reporting functions. Part I reports Marketplace-granted coverage exemptions for individuals who received an exemption certificate number from the Health Insurance Marketplace. Part II contains only line 7, which is a single checkbox to claim the exemption when your household income or gross income falls below the filing threshold. Part III handles month-by-month exemption reporting through columns (d) through (p), which represent January through December for each individual requiring an exemption.
Reporting Coverage Gaps and Exemptions
Complete a separate line in Part III for yourself, your spouse if filing jointly, and each dependent claimed on your 2016 tax return. Enter each person's name and Social Security number exactly as shown on your tax return.
Marketplace Exemption Certificates
Enter exemption codes in the designated field on Form 8965 if you received a 2016 Health
Insurance Marketplace exemption certificate. The Health Insurance Marketplace issues exemption certificates for certain hardship situations, membership in recognized religious sects, and ineligibility for Medicaid based on state decisions.
Income-Based Exemptions and Premium Tax Credit Interaction
Claim the household income exemption by checking the box on line 7 of Part II if your household income or gross income falls below your filing threshold. This exemption applies to everyone in your tax household for the entire year. You do not need to complete Part III when you qualify for this exemption unless you are claiming other exemptions for specific months.
Calculate your household income by adding your modified adjusted gross income to the modified adjusted gross income of each dependent you claim who is required to file a tax return.
Short Coverage Gap Exemption
The short gap exemption applies to coverage gaps of less than three consecutive months and does not trigger shared responsibility payment liability for those months. Enter code "B" in Part
III, column (c), and identify the months to which the exemption applies.
Premium Tax Credit Reconciliation Requirements
Taxpayers who enrolled in health insurance coverage through the Health Insurance Marketplace may qualify for the premium tax credit to help pay monthly premiums. Advance payments of the premium tax credit reduce your monthly premium payment when made directly to insurance companies on your behalf. You must attach Form 8962 to your tax return to reconcile advance payments received during the year with the final premium tax credit amount. The premium tax credit calculation requires information from Form 1095-A, which the Marketplace sends by early
February of the year following the tax year.
Calculating Shared Responsibility Payment
The 2016 shared responsibility payment uses the flat-dollar amount method or the percentage-of-income method, whichever produces the greater amount. The flat-dollar penalty is $695 per adult and $347.50 per child under age 18, up to a family maximum of $2,085. The percentage method calculates 2.5% of household income above the filing threshold. Apply the
calculation only to months when minimum essential coverage was not in effect, and no exemption applies.
Filing and Payment Procedures
Enter the calculated shared responsibility payment amount on the designated line of Form 8965.
Attach Form 8965 to your 2016 income tax return in the sequence required by the return assembly instructions. Include any exemption certificates or correspondence from the Health
Insurance Marketplace with your tax return. Transfer the shared responsibility payment amount from Form 8965 to Form 1040, line 61, or Form 1040A, line 38, or Form 1040EZ, line 11, depending on which form you file.
This payment is not a tax credit and cannot reduce your tax liability below zero. Do not remit the shared responsibility payment separately from your tax return.
Important Filing Deadlines
File Form 1040 by April 17, 2018, because April 15 falls on a Sunday and the Emancipation Day holiday in the District of Columbia is observed on April 16. Late filing may result in interest charges and penalties on any unpaid tax amounts.
Full-Year Coverage Reporting and Employer Information
Check the "Full-year coverage" box on your tax return if you had minimum essential coverage for all 12 months of 2016. You do not need to file Form 8965 when you and all members of your tax household maintained health insurance coverage throughout the year.
Employer-sponsored plans, government-sponsored programs such as Medicare Part A, and qualifying health coverage purchased through the Health Insurance Marketplace all satisfy the minimum essential coverage requirement. Coverage providers, including insurance companies, send Form 1095-A, Form 1095-B, or Form 1095-C to document your months of coverage and your dependents’ months of coverage.
Applicable large employers file Form 1094-C as a transmittal form when submitting multiple
Forms 1095-C to report employer-sponsored coverage information. Eligibility for the premium tax credit depends partly on whether you had access to affordable employer-sponsored coverage during the year. Verify the accuracy of coverage information before claiming the premium tax credit on Form 8962.
Month-by-Month Reporting Requirements
Report only the specific months without coverage in the appropriate columns of Part III. Each calendar month must be separately identified or left blank to indicate that minimum essential coverage was in effect. The form requires individual identification of each household member's coverage status, and you cannot combine months or estimate coverage periods. Coverage for at least one day during a month qualifies you as having coverage for that entire month.
Documentation and Record Retention
Gather health insurance statements, exemption notices, and coverage documentation for each household member before beginning the filing process. Retain the exemption notice in your tax records for documentation purposes. Document the dates of any coverage interruption to support your claim if the Internal Revenue Service requests verification. Complete the calculation worksheet embedded in the 2016 instructions if Part III indicates uninsured months that require a shared responsibility payment calculation.
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