2014 Tax Year Changes


By Joseph C. Smith, EA, MS Tax, contributor

Believe it or not, 2014 is coming to a close. A new year will soon begin and the annual tax filing ritual will also commence. This tax year promises to be more interesting for one simple reason: the Affordable Care Act (ACA), also known as Obamacare.

The ACA Impact

Starting in 2014, everyone is required to carry health insurance or pay a penalty, unless an exception applies. Reporting your coverage, paying any penalties, claiming premium tax credits and paying back any excess credits will be processed on your tax return. It’s no longer just your W2s you have to deal with.

Reporting coverage: If you were covered under an employer-sponsored health insurance policy or the marketplace the entire year, reporting the coverage on your tax return is simple. You just check a box. In 2015, your health insurance coverage will be reported to the IRS by the health insurance carrier (or employer, if it is self-funded). When you complete your 2015 return, your declaration of coverage will be matched to the IRS database and any discrepancies will be outlined in a letter from the IRS which will need to be addressed promptly to avoid any penalties.

Gaps in coverage or exemptions: Since travelers often work with different companies, there will be a potential for coverage gaps between jobs. If you fail to carry health insurance more than 3 months, then the penalty applies. A lapse of less than 3 months is allowed but the “exemption” must be recorded on the tax return. For travelers who have two lapses in coverage in the same year that are less than 3 months apiece, an additional hardship waiver will need to be requested on the tax return.

Tax credits: If you bought coverage from the marketplace, you will receive a 1095A form reporting your coverage. If you qualify for or received premium tax credits, you will then have another form to complete that both establishes the amount of credits you are eligible for and reconciles the credit you received during the tax year (if any) based on your income level. The tax credits are based on household income and are granted prospectively based on the previous tax year’s income data. If you made more income than the previous year (that the credit was based on), you will have an additional amount to pay. If you made less, then more credit is allowed.

Other Changes
At the time of this article (December 2014), over 50 tax provisions had expired. These provisions are often referred to as “extenders” because Congress has renewed them every year for quite some time. These provisions include the deduction for sales taxes, private mortgage insurance and many more. The “lame duck” Congress currently seated may not get these extenders renewed. If they cannot, the new Congress that convenes in January most certainly will. Regardless of which Congress is successful, the extenders may die if President Obama chooses to veto the legislation. Some pundits think this is very likely. If the extenders somehow pass, watch for significant delays in refund processing. The IRS will have to retool their computers to accommodate the retroactive changes. That could make for a very chaotic tax filing season.

About the author:
Joseph Smith is an IRS enrolled agent (EA) with a master’s in taxation, and a former travel respiratory therapist whose firm, TravelTax, provides tax preparation and audit representation for travel nurses and other mobile professionals.

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