Obamacare’s tax-time lessons

The second round of Obamacare open enrollment is over, but your paperwork may not be.

It’s tax time.

And as I suspected, this is shaping up to be a stressful period for many Californians who remained uninsured or purchased health insurance from Covered California.

Q: I had a Covered California plan for eight months last year before I moved to Texas. But I still haven’t received a 1095-A form from Covered California. What should I do?

A: When Travis Choma, 35, moved from California to Dallas in August, he arranged to cancel his Covered California health plan and start a new plan from the federal health insurance exchange, healthcare.gov.

Everything went smoothly on the federal side. Not so much here. Among the complications is Choma’s missing 1095-A tax form from Covered California, which lists the amount of tax credits he received in 2014. (By comparison, he received his 1095-A from healthcare.gov in early January.)

“This is so frustrating,” says Choma, an independent software developer who has spent countless hours trying to fix the problem. “I’m a person who takes my paperwork seriously and gets it correct.”

You need these forms for your taxes. But Covered California hasn’t made it easy. The agency told me previously that it sent out about 100,000 forms containing inaccurate information, and promised to send out revised ones by late-February.

But about 10,000 tax filers of the 100,000 didn’t receive 1095-A forms at all, says Covered California’s Dana Howard.

Covered California had conflicting information for those tax filers, such as two different addresses, Howard says. “There were multiple sets of information for the same person,” he says.

The agency has been working to fix inconsistencies and distribute the forms, Howard says.

If you still don’t have your tax form, or have received one with inaccurate information, file a 1095-A dispute form with Covered California as soon as possible. (Find the form at www.CoveredCA.com.)

Covered California has 60 days to respond, which may push you beyond the April 15 tax filing deadline.

If that happens, you have options, such as requesting an extension to file your taxes, says Alison Flores of the Tax Institute at H&R Block. That might not be the best plan for your situation, so the most useful advice I have, which I’ve given to you before, is to consult a tax professional.  

Q: Is it true that Covered California is still letting people enroll if they want to avoid a tax penalty next year?

A: Let’s deal with 2014 first. If you didn’t have health insurance for all or part of last year, you already owe an Obamacare tax penalty for 2014 (unless you qualify for one of the law’s many exemptions.)

Now for 2015. If you still don’t have insurance this year, Covered California is giving you a second chance. It announced a special enrollment period – which lasts until April 30 – for people who didn’t realize there was a tax penalty.

But you’re probably not going to get off scot-free when you file your 2015 tax return next year.

Obamacare’s tax penalty is prorated, which means you will owe one-twelfth of the annual penalty for each month you or your dependents don’t have coverage or an exemption from the law, Flores says.

If, say, you sign up for health insurance on April 25, your health plan won’t start until June 1. That means you’ll be uninsured for five months in 2015 and owe five months of penalty, Howard says.

That’s still better than a full year’s worth, he says.

I’m going to spare you some potential complications, but the lesson here is that signing up during this special enrollment period doesn’t automatically mean that you’ll avoid a penalty for 2015.

Speaking of the tax penalty, I’m also hearing that some people are being incorrectly penalized for 2014. For instance, unauthorized immigrants and those in the Deferred Action for Childhood Arrivals immigration program are exempt from the penalty because they are excluded from health insurance exchanges and receiving tax credits.

But the National Immigration Law Center is receiving complaints that tax professionals are giving some of their clients in these categories bad information.

“So many of them are low-income individuals who can’t afford to pay this penalty anyway,” says Gabrielle Lessard, the group’s health policy attorney.

I still believe you should seek tax help. But you might want to ensure your preparer has been schooled in Obamacare’s new tax rules.

Q: You keep telling us to get tax help, but I can’t afford a preparer. Do I have any options?

A: There are many free tax preparation services available, including the Volunteer Income Tax Assistance (VITA) program, run by the IRS. VITA is available at libraries, schools, shopping centers and other sites around the country. Go to www.irs.gov/VITA or call 800-906-9887 to learn more.

The AARP Foundation Tax-Aide program also provides free assistance, and its volunteer preparers are trained in Obamacare’s particulars. Go to www.aarp.org/findtaxhelp or call 888-227-7669 for more information.

Please note that some of these programs are limited by age, income or other factors.

Finally, I’ll end with a correction: In my previous column about Covered California’s small-business exchange, called SHOP, I incorrectly said it offers the same plans available to individuals and families. Instead, it offers fewer insurance carriers with somewhat different options. Learn more at www.CoveredCA.com/small-business.

Click here to find previous Ask Emily columns. 

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