Skip to content

Test Your Knowledge About Long-Term Care with AARP’s Long-Term Care Quiz

 

What You Need to Know When Filing 2014 Taxes

Be sure you have your proof of medical insurance

Tax changes for your 2014 return

IRS

When filing your 2014 tax return, understand the importance of Form 1095-A and Form 8962 as they relate to marketplace-purchased health insurance.

En español | You might want to get an early start on filing your 2014 tax return this year.

Due to Internal Revenue Service budget cuts, the agency says there will be limited tax preparation help, longer-than-normal customer service wait times for callers and delays in processing paper returns.

IRS Commissioner John Koskinen recently urged taxpayers to use the agency's phone lines only as a last resort.

If you're a do-it-yourself preparer, here's another reason to tackle your tax forms early: New rules related to health care may be confusing for some. For the first time, taxpayers will have to show that they've complied with the Affordable Care Act by checking a box on IRS Form 1040 verifying they had health insurance — such as through their employer, Medicare or the military — or pay a penalty called the shared responsibility payment if they didn't.

Those who purchased insurance through the new health insurance marketplace in 2014 will receive Form 1095-A by mail. This document contains insurance premium costs and other information you'll need to prepare Form 8962, your premium tax credit and reconcilement form. The calculations on your reconcilement determine whether your advance tax credit for enrolling in the marketplace was correct for your income and other factors.

If your actual income was higher than you predicted (if you got a pay raise or took another job with higher earnings in 2014, for example) and you collected a bigger government subsidy than you should have, you'll have to pay back some of it. However, the IRS recently announced that it would waive penalties for making that payment late or for underpayment of estimated taxes throughout 2014.

Taxpayers can request the relief when the IRS sends a notice of penalty. Filers still must pay the taxes within a year or will owe interest if they're not paid by the April 15 deadline for tax returns, says Mark Steber, chief tax officer at Jackson Hewitt Tax Service, based in Parsippany, N.J.

Steber says it may be tempting to skip the IRS reconcilement paperwork that's required if you enrolled through the insurance marketplace. But he cautions filers to resist that urge.

"If you're in the marketplace, [Form 8962] is not something you can leave off or skip or leave it for later," he says. "It will create complications with your tax refund being processed. Do not shortcut this step."

For those who didn't have health insurance coverage last year, you won't have to pay the penalty if:

  • The IRS or the exchange granted you an exemption due to financial hardship, religious beliefs or other reasons.
  • Your minimum health care premium is more than 8 percent of your household income.
  • You have a gap in coverage of less than three months.

The penalty for not being in compliance is the higher of:

  • 1 percent of your household income above the tax return threshold for your filing status, or
  • A flat dollar amount of $95 per adult and $47.50 per child, to a family maximum of $285.

In other tax-related news, lawmakers in December extended a number of popular tax breaks that people can take on their 2014 returns. Among them:

  • If you are 701/2 or older, you could have donated up to $100,000 directly from your IRA to a charity in 2014 without paying income tax on the distribution.
  • Taxpayers can choose to deduct either state and local sales taxes or state and local income taxes — a boon to those living in states without an income tax.
  • Up to $4,000 in college tuition and fees from 2014 can be deducted for those within certain income limits.
  • Filers can deduct up to $2 million of mortgage debt forgiven by a lender on a principal residence in 2014. Forgiven debt is generally taxed as income.

Tax preparers encourage early filing, particularly if you are expecting a refund, to help reduce your risk for identity theft.

Your tax return can only be filed once a year, Steber says: "The earlier you file, you lock out all that information from some fraudster using it. It stops any ID theft cold."

So how long will it take to collect your tax refund? IRS officials say most electronic refunds will be processed and issued within three weeks. Paper returns that typically take up to six weeks could now take seven weeks due to budget cuts and reduced staffing.

For more information on the Affordable Care Act and taxes, visit healthcare.gov or the IRS website.

Also of Interest

Join AARP Today — Receive access to exclusive information, benefits and discounts

Join the Discussion

0 | Add Yours

Please leave your comment below.

You must be logged in to leave a comment.

Next Article

Read This