Recent Tax Updates

Under the Affordable Care Act, there are a number of situations where an individual may receive an exemption from the requirement to have health insurance for all or part of the year. If an individual qualifies for a pre-defined exemption or believes they qualify for a hardship exemption they will need to complete Form 8965 (Health Coverage Exemptions) and attach it to their 2014 federal income tax return. Doing so will allow the individual to avoid having a penalty assessed against them for not having health insurance.

Where an exemption can be requested is important. Some exemptions must be obtained through the Marketplace (an individual must have applied and received their exemption certificate number before they file their return). Certain exemptions can only be requested at the time the federal return is filed, while others can be requested through the Marketplace or when filing their federal return.

Exemptions that can only be obtained from the Marketplace are as follows:

• Member of a religious sect that is recognized by the Social Security Administration as conscientiously opposed to accepting insurance benefits
• Individual did not have access to affordable coverage based on their projected household income
• Individual is ineligible for Medicaid solely because the state they reside in did not expand the eligibility requirements for Medicaid under the Affordable Care Act
• Individual has been notified that their health insurance policy is not being renewed and the individual considers other available plans as being unaffordable
• Individual is experiencing circumstances that prevent them from obtaining coverage under a qualified health plan

Exemptions that can be requested through the Marketplace or on Form 8965 when filing a 2014 federal return:

• Individual is a member of a recognized health sharing ministry
• Members of a federally recognized Native American tribe
• Individual is incarcerated
• Coverage is unaffordable
• Individual purchased health insurance through the Marketplace during the initial enrollment period but has a coverage gap at the beginning of 2014
• Individual is a Native American, Alaska native, or a spouse or descendant who is eligible for services through a Native American health care provider

Examples of some of the exemptions that may only be requested by filing Form 8965 with their 2014 federal return:

• Health insurance coverage is considered unaffordable
• Individual has a short coverage gap
• Household income is below the filing threshold
• Individual is not lawfully present in the U.S.

Form 8965 (Health Coverage Exemptions)
If a taxpayer is eligible for an exemption from having health insurance for 2014, they must complete Form 8965 (Health Coverage Exemptions) to avoid owing a penalty (shared responsibility payment) for 2014.

The form is divided into the following sections:

• Part I – Exemptions that must be obtained from the Marketplace (Federal or State Exchange)

  An individual must apply for the exemption before they file their return. When they file the Form 8965 they must enter the exemption certificate number that the Marketplace will issue them.

• Part II – Coverage Exemptions for Your Household Claimed on Your Return

  This section is used mainly for hardship exemptions that the taxpayer would not know they are eligible for until the end of 2014.

View the current draft of Form 8965, or see the following websites for more information on exemptions and how they can be requested.

• Individual Share Responsibility Provision – Exemptions on the IRS website
• How Can I Qualify for an Exemption? on the HealthCare.gov website.