If you obtained health insurance coverage through Obamacare during all or part of 2014, you can’t complete or file your tax return without IRS Form 1095-A, Health Insurance Marketplace Statement. This is a brand new tax form that was mailed to Obamacare recipients by early February 2015.
Form 1095-A shows the type of health coverage you and your family received, how much it cost, and the amount of advance premium payments, if any, that were paid each month to your health insurer on your behalf by the federal government. If you received health insurance subsidy payments through Obamacare, you need the information on this form to determine whether the amount of such payments were correct, based on the 2014 income shown on your tax return. If the payments you received were too high because you underestimated what your 2014 income would be when you applied for Obamacare, you’ll have to pay back all or part of them.
Unfortunately, the IRS has announced that the Centers for Medicare and Medicaid Services issued incorrect Forms 1095-A to 800,000 people in 37 states who enrolled in health insurance through HealthCare.gov, the federal health insurance exchange. This represents about 20% of the people who obtained their insurance through the federal exchange. Those who obtained their coverage through one of the 13 state exchanges are not affected.
The mistake on the form shows the incorrect amount for the second lowest cost silver healthcare plan available in the state involved. This is a crucial error because the "second lowest cost silver plan" is a benchmark number used to determine the amount of subsidy payments Obamacare recipients are entitled to. This number is known only to the insurance exchanges.
If you received an erroneous Form 1095-A, you should receive a phone call from HealthCare.gov by early March, as well as letters and emails alerting you to the problem. Corrected Forms 1095-A are being sent to affected taxpayers. You can also download a copy from HealthCare.gov.
The IRS advises that, if you obtained your coverage through HealthCare.gov and have not yet filed your taxes, don’t do so until you receive the corrected form. If you’re a farmer or fisherman and you ordinarily file your taxes by March 1 (and thereby avoid having to make estimated tax payments), don’t worry. The IRS won’t penalize you for filing late.
The IRS also says that, if you’re one of the estimated 50,000 people who have already filed their 2014 tax returns using an erroneous Form 1095-A, you don’t need to do anything. There is no need to file an amended return. This is true even if you ended up getting larger subsidy payments than you were entitled to. The IRS will not try to collect additional taxes from those who relied upon the erroneous Forms 1095-A. These taxpayers may end up getting a bit of a windfall.
If you’re one of the 50,000 taxpayers who already filed your return with erroneous 1095-A forms, you should redo your 2014 return once you get the corrected 1095-A. If it turns out you received the right amount of subsidy payments, or too much, you don’t have to do anything. But if you were paid too little--because you overestimated what your 2014 income would be when you applied for Obamacare—you’ll be entitled to a tax refund. You’ll need to file an amended return to get the refund.