For a taxpayer that did not have health insurance for 2014, he or she must either owe a penalty tax on line 61 of Form 1040, or must file Form 8965, Health Coverage Exemptions, to report to the IRS why he or she is not subject to the penalty. The only exception to this rule is if the taxpayer is below the filing requirement.
There are three types of coverage exemptions reported on Form 8965:
- Form 8965, Part I: Use this part to claim a coverage exemption that was granted from the Marketplace.
- Form 8965, Part II: Use this part if the taxpayer is below the filing requirement, but files a return anyway (such as to claim a refund of withheld taxes).
- Form 8965, Part III: Use this part to claim a coverage exemption on the tax return.
Enter in column c of Part I the exemption certificate number (ECN) from the Marketplace if required. The ECN must be obtained prior to filing the tax return. The IRS will reject returns that claim an exemption in Part I of Form 8965 but do not include an ECN. The IRS acknowledges that most taxpayers will not apply for an exemption on their own, even though the healthcare.gov website tells them they need to. Recognizing this problem, the IRS allows a tax preparer to file Form 8965, claiming that a Marketplace-provided exemption had been applied for but the taxpayer had yet to receive it. The tax preparer will put “Pending” instead of the ECN.
Resources
- Individual Share Responsibility Provision – Exemptions – IRS.gov
- How Can I Qualify for an Exemption? – HealthCare.gov
- Affordable Care Act – Tacct.net
- Health Care Tax Tips – IRS.gov
