We recently learned that many of the 1095-A forms sent out to individuals who purchased health insurance through HealthCare.gov, the federal health insurance exchange are incorrect. The problem is 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 mistake is that the form shows an incorrect amount for the “second lowest cost silver plan”. This is a benchmark number which is an essential part of the calculation of the premium assistance tax credit, the federal subsidy for health insurance premiums. And unlike other types of figures, such as wages or interest that can be independently verified through documents that a taxpayer has in his or her possession, the second lowest cost silver plan is a figure that is known only to the insurance exchanges, as it is based on the cost of health insurance available through an exchange for the family size and location of the persons being insured.
This mistake affects “about 20 percent” of people who obtained discounted health insurance in 2014 through Healthcare.gov.
How to Tell if This Problem Affects You
- If you purchased health insurance through Healthcare.gov, then
- Log in to your Healthcare.gov account and look for a message that says whether or not your Form 1095-A is correct.
How This Mistake Impacts the Tax Return
Form 1095-A is a new tax form designed by the IRS and issued by health insurance exchanges. This form reports information about a person’s health insurance coverage, such as which people are insured, for what time period, the cost of the insurance, the amount of premium tax credits paid in advance, and the amount of the second lowest cost silver plan. An incorrect Form 1095-A essentially means that taxpayers who have a Form 1095-A in their possession must first ascertain whether this tax form is accurate or not before they can file their federal tax return. The reason why is to prevent the possibility of filing a return now, only to have to amend the tax return later once a corrected Form 1095-A is issued.
Already Filed Tax Returns Do Not Have to be Amended
The Treasury Department estimates that about 50,000 people already filed their tax returns using the incorrect Form 1095-A. “We have concluded that these individuals do not need to file amended returns,” the Treasury Department stated in its announcement.
Using the incorrect information, a person could have paid less tax than if they had the correct information at the time the tax return was prepared. “The IRS will not pursue the collection of any additional taxes from these individuals based on updated information in the corrected forms,” the Treasury Department further announced.
Nonetheless, it may be beneficial to go through the process of preparing an amended tax return once the corrected information is received. Here’s why. It’s important to figure out if the taxpayer is due additional refund, or would have owed additional tax. If the taxpayer owes additional tax, the Treasury Department announcement is saying, basically, don’t worry about the additional amount owed. The IRS won’t pursue collections. If the taxpayer is due additional refund, however, the taxpayer will benefit by filing an amended return. That’s because the IRS will issue the additional refund only after an amended return is filed.
What to Do Next
“If your form was affected, you will receive a phone call from the Marketplace by early March, in addition to letters and emails with additional information about the status of your form,” states the Centers for Medicare & Medicaid. However, individuals can take the following proactive step. Log in to your account at Healthcare.gov. “You will see a notice message that will let you know if your form was or was not affected,” the Centers for Medicare & Medicaid said in their announcement. If you have not yet filed, postpone filing until you receive a corrected 1095A