Health care law adds new wrinkle to tax season

This tax season offers a new wrinkle as individual filers must report to the IRS whether they had health insurance during 2014.

The requirement brings a new task for MNsure, too, since the state's health insurance exchange must send more than 30,000 tax forms to people who bought private coverage last year.

Tax experts say the new requirements won't mean much to most Minnesotans, who will simply check a box saying they had coverage.

But there's more work for those who didn't have health insurance, or for those who qualified for federal tax credits through MNsure.

"It's a big deal for a few people," said Chris Wittich, an accountant and manager with Boyum & Barenscheer in Bloomington. "It's no deal at all for a lot of people."

Starting last year, the federal Affordable Care Act required almost all Americans to have health insurance. Those who lacked coverage could be required as part of taxes due April 15 to pay the greater of $95 for the year, or 1 percent of income.

People who lacked coverage for more than three months, but less than the full year, would pay a proportional amount.

About 40 percent of people who enrolled in private health insurance during 2014 through the health insurance exchange received a tax credit, according to MNsure. The exchange estimates cumulative savings across the state of about $30.9 million, spread across about 16,100 people.

The precise value of an individual's tax credit depends on a number of factors including income. People who earned more in 2014 than they projected at the time of their MNsure application could now find they owe money.

Conversely, those who didn't get the full tax credit they should have during 2014 will see the credit on their taxes.

"For the people who took [the tax credit] in advance, unless they're amazingly good at estimating their income for the year, I expect that they will all have some kind of tax due or credit coming," said Wittich, who has been providing commentary about the issue on behalf of the Minnesota Society of Certified Public Accountants.

To help filers with the reconciliation, MNsure must distribute a new tax document called Form 1095-A, which lists the value of tax credits received. Even those who didn't get a tax credit will receive the form if they bought through MNsure, Wittich said.

About 70 percent of the forms have been mailed out thus far, MNsure officials said on Monday. The remaining forms have been held back due to complexities in tax credit calculations, said Joe Campbell, a MNsure spokesman.

For example, calculating the proper tax credit can be complicated if a subscriber came in and out of private coverage through MNsure during the year, or reported changes in household composition. Even so, the exchange expects to send those notices this week, Campbell said.

MNsure officials say they've received many calls and messages from people covered through the state's MinnesotaCare program who wonder why their forms haven't yet arrived. The answer: People covered through MinnesotaCare won't get a Form 1095-A, Campbell said, since their subsidized coverage isn't coming through what's called an "advanced premium tax credit."

"The 1095-A is needed to properly file your federal tax return if an advanced premium tax credit was applied to your coverage or you wish to claim a tax credit for 2014," said Scott Leitz, the MNsure chief executive, in a statement. "You need the information on this form to file your federal income tax return."

A smaller share of Minnesotans buying through the MNsure exchange are getting tax credits than their peers in other states.

One factor is that Minnesota expanded its Medicaid program and operates MinnesotaCare, said Lynn Blewett, a health policy expert at the University of Minnesota. Broader coverage through public health insurance programs effectively removes from the MNsure market consumers who in other states would be shopping with tax credits.

Plus, premiums were so low in Minnesota during 2014 that relatively few people here qualified for tax credits.

"Our tax credits will tend to be lower because of our lower premiums," Blewett said.

If the vast majority of Minnesotans will simply check a box saying they have health insurance, how will the IRS check to make sure people are telling the truth?

"As with everything else on your return, they would find out under an audit," Wittich said. "At this point anyway, you don't need to provide them your insurance carrier information. … You just need to have those records available."

Christopher Snowbeck • 612-673-4744

Twitter: @chrissnowbeck