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Time to get your Obamacare tax situation in order

Tax filers this season will both face higher potential Obamacare penalties and wrestle with new forms, but most people won't break a sweat dealing with either as they prepare their returns.

Federal officials on Friday highlighted several Obamacare-related issues for this tax season — and reminded people who have gotten subsidies to help pay for their health insurance to make sure that their tax returns correctly reflect that assistance, or risk losing future aid.

"It's a month before the tax filing deadline," noted Kevin Counihan, CEO of the federal Obamacare insurance marketplace HealthCare.gov, during a conference call with reporters.

People sit with insurance agents as they discuss plans available under the Affordable Care Act.
Getty Images
People sit with insurance agents as they discuss plans available under the Affordable Care Act.

This season is the second tax year to factor in the effects of Obamacare, which includes an obligation to have some form of health insurance, either through your job, an individually purchased plan, Medicare, Medicaid or other government program.

Those who fail to have such coverage may be subject to a tax penalty, which has risen considerably this season from last year.

This period is the first time that people are receiving forms from their employers, insurers and government health programs to indicate if they had health coverage throughout the year.

Those 1095-B and 1095-C forms are not required to be filed when you submit your income tax return, but should be kept with your personal tax records.

Many people, but not all, have already received the forms. The Internal Revenue Service gave employers an extension until the end of March to send them out.

But "taxpayers don't need to wait to receive these forms to file their tax returns," said Mark Mazur, assistant secretary for tax policy at the Treasury Department.

Mazur noted that up to 94 percent of people file their tax returns electronically, which makes dealing with the tax implications of the Affordable Care Act relatively easy for most.

Most Americans, an estimated 80 percent, will only be required, as they were last year, to check a box on their tax returns indicating they had health insurance coverage over the course of 2015, meaning they won't have to pay the Obamacare penalty.

People who didn't have insurance during the year will either have to pay a penalty, or cite one of several qualifying exemptions for not having coverage and avoiding the penalty. Exemptions include not making enough money to be able to afford insurance, being a victim of domestic violence, the death of a family member and filing for bankruptcy.

The TurboTax tax filing preparation software unit of Intuit last month reportedly said that about 70 percent of uninsured customers were claiming an exemption.

The penalty for not having coverage in 2015 is the higher of $325 per adult or 2 percent of taxable household income. That's up from the penalty imposed last tax season on uninsured people, which was the higher of $95 per adult or 1 percent of household income.

The H&R Block tax preparation company earlier this month said that people who are uninsured so far this tax season are paying more than double that what they did last year to satisfy the Obamacare penalty. The average penalty so far has been $383 for uninsured H&R Block customers this season, compared to the average of $172 in penalties paid last year.

People who got Obamacare subsidies to reduce the cost of health plans purchased on government-run exchanges will be required to reconcile that aid with their actual taxable income, as opposed to what had been estimated at the time the aid was awarded.

More than 9 million people who enrolled in Obamacare plans last year qualified for such subsidies, or tax credits, and the amount of that aid is linked both to their income and to the price of their health plans.

People who got too much aid to offset the cost of their Obamacare premiums will owe some money back, reducing any overall tax refund they are due.

But people who didn't get enough help with their insurance premiums during the year will get more money from the government.

"It's extremely important that those who received advance payments of the premium tax credit reconcile these payments when they file their tax return," Counihan wrote in a blog post.

"Individuals who do not do so will generally see their refunds delayed, and are not eligible to receive advance payments of the premium tax credit in future years."

The IRS, in a letter to Congress in January, noted that up to 1.4 million people who received Obamacare aid for their 2014 health plans had either failed to file a return or to reconcile their subsidies with their incomes. Those people have been contacted and informed that their subsidies for 2016 are at risk of being taken away as a result.

Officials said that Obamacare customers who have questions about tax issues relative to their health plans should contact the call center of HealthCare.gov at 1-800-318-2596.

Additional resources and information are also available at www.healthcare.gov/taxes or www.IRS.gov/aca.