Health Coverage Exemptions Checklist – 2014 Tax
Year
Form 8965 allows taxpayers to claim exemptions from the individual shared responsibility
payment for months when they lack minimum essential coverage or meet IRS-recognized hardship criteria. The 2014 tax year marked the first full calendar year of exemption eligibility determinations under the Patient Protection and Affordable Care Act. Taxpayers must attach
Form 8965 to their Form 1040 or Form 1040-A when claiming health coverage exemptions or calculating penalty liability for uncovered months.
Understanding the Shared Responsibility Payment for
2014
The individual shared responsibility payment for 2014 equals the lesser of two calculated amounts. You must compare one percent of household income above the tax filing threshold against a flat dollar amount of 95 dollars per adult and 47 dollars and 50 cents per child, with a maximum family cap of 285 dollars.
Minimum Essential Coverage Requirements
Minimum essential coverage includes employer-sponsored coverage, government programs such as Medicare Part A, Medicare Advantage, Medicaid, and CHIP programs, and qualified health plans purchased through the Health Insurance Marketplace.
Catastrophic plans purchased through the Marketplace qualify as minimum essential health coverage for 2014. Short-term limited-duration plans do not meet the minimum essential coverage standard and cannot satisfy the individual mandate. You are considered to have coverage for an entire month if you maintain minimum essential coverage for at least one day during that month.
Filing Requirements and Tax Household Composition
Only one Form 8965 should be filed for each tax household. Your tax household includes you, your spouse if filing jointly, and any dependents you claim on your tax return.
Part I of Form 8965 reports Marketplace exemptions using the Electronic Confirmation Number provided by the exchange. Part II allows you to claim household income exemptions when your income falls below the tax filing threshold for your filing status. Part III enables you to claim individual exemptions directly on your tax return for specific household members and qualifying months.
Income-Based and Affordability Exemptions
You qualify for an income-based exemption if your household income falls below the applicable tax filing threshold for your filing status and family size. Affordability exemptions apply when the lowest cost coverage available through employer-sponsored coverage or the Health Insurance
Marketplace exceeds eight percent of your household income.
Hardship and Marketplace-Granted Exemptions
For the 2014 tax year, hardship exemptions were available to individuals who experienced qualifying events such as homelessness or the threat of eviction or foreclosure, utility shut-off notices or recent loss of essential services, domestic violence that interfered with obtaining coverage, the death of a close family member, significant medical expenses or medical debt that made insurance unaffordable, or a bankruptcy filing during the year.
Certain hardship exemptions require advance approval from the Health Insurance Marketplace before filing a tax return. In contrast, others could be claimed directly on Form 8965 by entering the appropriate exemption code in Part III. According to the 2014 instructions, taxpayers were not required to attach supporting documents to their returns. Still, they were expected to keep records on hand in case the Internal Revenue Service later requested verification.
Monthly Coverage Status and Exemption Timing
Each month of the tax year must be reviewed to determine when minimum essential coverage was not in place and whether an exemption applies for those uncovered periods. An exemption is treated as covering the entire month if eligibility existed for at least one day during that month.
A short coverage gap exemption is available when health coverage is missing for fewer than three consecutive months during the year, and this exemption may be claimed directly on the tax return by entering exemption code B in Part III of Form 8965.
Completing and Filing Form 8965
Form 8965 cannot be filed separately and must be attached to your Form 1040 or Form 1040-A before submission. Enter your Social Security Number, filing status, and household income in
Part I if you are reporting Marketplace-granted exemptions.
List each dependent's information in Part II when claiming income-based exemptions for your entire tax household. Complete Part III for individual exemptions by entering the name, Social
Security Number, exemption code, and applicable months for each person. If you are not claiming exemptions for all months and all household members, complete the Shared
Responsibility Payment Worksheet in the 2014 instructions and report the calculated amount on line 61 of Form 1040.
Documentation and Record Retention
Copies of the completed Form 8965 and all related supporting records should be maintained for a period of three to seven years. Appropriate documentation may include proof of income, written hardship statements, utility shut-off notices, foreclosure documents, or correspondence with health insurance providers.
The IRS may issue notices requesting verification of exemption claims, and responses are generally required within the time frame stated in the notice. For the 2014 tax year, large-scale processing of shared responsibility payment calculations led to matching notices being sent to taxpayers in 2015 when exemption claims appeared incomplete or conflicted with third-party coverage data.
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