The Affordable Care Act is a mandate that requires every eligible American to have some form of basic health coverage.
If you lack insurance, you’ll face a penalty when you file your tax returns, unless you have an exemption. How you obtain an exemption is dependent on the kind of coverage exemption.
You can attain some exemptions only from the Marketplace in your residential area, others from the IRS only, and others from either the IRS or Marketplace. To avoid penalties during tax season, here’s what you need to know about health exemptions.
Types of Exemptions
Numerous Americans don’t file their tax returns since their revenue falls below the threshold that expects them to do so. That is the case for a single taxpayer who earned below $10,150 in 2014 or a married couple with revenue below $20,300. Therefore, persons who do not have to file taxes are exempt from the mandate and don’t need to apply because it’s automatic.
These circumstances include facing foreclosure, eviction, obtaining a shut-off notice from a utility company, bankruptcy, or medical costs you couldn’t pay in the last two years.
In most cases, you will have to apply for exemption through the Marketplace where you can obtain the forms you require to complete the process. Furthermore, you’ll probably have to provide paperwork to support your claims, for instance a copy of bankruptcy filing or foreclosure notice.
Once you apply for any exemption, the marketplace administrators have a responsibility to establish whether you’re eligible. Bear in mind that this could take some time, so it’s important you submit your application early for a quick turnaround.
In the event that you qualify, you’ll obtain a certificate number via mail. On the other hand, if you face denial, you can appeal the decision.
You can obtain coverage exemption if you aren’t “lawfully present” in the United States or if you’re incarcerated. American tax laws apply to everybody who earns revenue in the U.S., irrespective of whether they are there legally.
Although undocumented or illegal immigrants are expected to file tax returns if their revenue is high enough, they’re exempt from the coverage requirement. They’re also barred from acquiring health coverage through online set up.
How to Acquire Exemption
You can claim most exemptions through Form 8965 when filing your tax return. If you or any family member qualifies for an exemption on your return, you have to file the Form with your tax return. You don’t need to call the IRS to obtain this coverage exemption beforehand.
If you aren’t required to file a federal revenue tax return for a year because your gross revenue is below your filing threshold, you’re automatically exempt from the joint responsibility provision for the affected year and don’t have to take further action to obtain an exemption.
Therefore, you don’t need to file a return only to report your coverage or claim exemption. If your revenue is below the filing threshold for your status and you decide to file a return, use Form 8965 (Part II) to claim exemption.
You shouldn’t make a joint responsibility payment if you’re exempt from the coverage prerequisite because your revenue falls below the filing threshold. You can claim other exemptions on your return using Part III.
You can claim most exemptions when filing your tax returns. However, the Health Coverage Marketplace must grant certain exemptions in advance. This includes exemptions for some hardships and for members of some religious sects.
If you can claim the exemption on your tax return, you don’t need to apply for a Marketplace-granted exemption. If you obtain exemption from the Marketplace, you’ll receive a notice with your distinct Exemption Certificate Number (ECN). Make sure you retain this notice along with other significant tax information.
According to the Affordable Care Act, everybody should have health coverage except for those who are exempt. If you’re wondering whether you fall under this category, this guide should be a great place to start.
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