Filing your tax returns just got a little more annoying: How to prove you don’t owe an ACA penalty

Winter is almost over and that means three things:

  • Looking forward to that first day you can wake up and ignore your parka as you leave the house
  • Pitchers and catchers are reporting
  • It’s time to do your taxes

As if that last point wasn’t annoying enough, recent Affordable Care Act regulations have made filing your taxes even more complicated. Luckily without even knowing it you’re reading Quotebroker’s 2016 guide to all things taxes as they relate to your health insurance. Let’s get started:

Wait, what does my health insurance have to do with taxes?

Absolutely nothing- until recently. The Affordable Care Act requires all Americans to have proper health insurance- a provision called the Individual Mandate. The way the government checks to see if you have coverage is via the IRS and your tax return. You prove you had insurance in 2015 along with your 2015 return, filed by April 2016.

How do I prove I had health insurance?

It depends on how you got your insurance in 2015.  

  • If you got your insurance from your employer, you’ll get a form called 1095-B in the mail either from your employer or the carrier of your health plan itself.  File this with your individual return.
  • If you got your insurance individually from an exchange, like Covered California, you’ll receive a document called 1095-A. File this with your individual return.
  • If you got your insurance privately- every plan is different. There’s a box on your tax return to indicate you had coverage for the entire year. Use it!

What’s on these 1095 forms?

1095 form prove that you had coverage throughout the year. They will indicate exactly which months you had proper coverage and how much (if any) in premium subsidy assistance you received.  This will help especially when reconciling how much in assistance you should have received vs. how much you actually did. The difference is reconciled on your return.

Reconciled on my return? What?

When you get help paying for your insurance throughout the year, you’re paying for some of the premium and the government is paying for the rest. This amount is technically called your Advanced Premium Tax Credit. It’s just like it sounds- a tax credit you get in advance, toward your health premium. Here’s the catch. Because you don’t know what your 2015 income is going to be unti 2015 is over, this credit is just a guess. This guess is an educated one, based on what you told the exchange you thought your 2015 income would be. If your income is actually more, your advanced tax credit should have been less, and you owe the difference. You pay it on your tax return. If your income is less than you estimated, you should have received more in advanced tax credits, and the government makes it up to you on your return.

Can I see a sample 1095 form?

Sure, take a look Quotebroker S.

What if I don’t receive my 1095 form?

Do not delay in filing your taxes because you did not receive your documentation. File your taxes properly and check the box indicating you had coverage throughout the year, assuming that’s the case.  Some health plans provide proof of coverage directly to the IRS and in these cases do not provide documentation directly to you.

What if I didn’t have coverage for the entire year?

You may be liable for a penalty tax. The good news is it’s not the entire year’s tax- it’s prorated only for each month you were not ensured. If you had only a small gap- two months or less- you won’t pay any penalty at all, due to the short-gap exemption.

What if I didn’t have coverage at all?

You’re going to end up paying the penalty tax. The tax for 2016 is:

  • 2.5% of household income maxed out at the average cost of a marketplace Bronze plan OR
  • $695 per adult and $347.50 per child, maxed out at $2085

That’s a lot of money. Is there any way to avoid paying that?

Perhaps. Our next blog post will address all of the possible ways to avoid an ACA penalty via penalty tax exemptions. Stay tuned!


As always, feel free to reach out to us with any questions via email at or  on Twitter or Facebook.  We answer every submission.