The Patient Protection and Affordable Care Act requires you and each member of your family to have minimum essential coverage, qualify for an insurance coverage exemption, or make an individual shared responsibility payment when you file your federal income tax return. If you meet certain criteria, you may be exempt from the requirement to have qualifying health coverage. If you are exempt, you will not have to make a shared responsibility payment when you file your 2014 federal income tax return this year. For any month that you do not qualify for a coverage exemption, you will need to have minimum essential coverage or make a shared responsibility payment.

How you get a coverage exemption depends upon the type of exemption for which you are eligible. You can obtain some exemptions only from the Marketplace, while others may be claimed when you file your tax return.

You might be exempt if:

• The minimum amount you must pay for the annual premiums is more than eight percent of your household income
• You have a gap in coverage that is less than three consecutive months
• You qualify for an exemption for one of several other reasons, including having a hardship that prevents you from obtaining coverage, or belonging to a group explicitly exempt from the requirement

You will claim or report coverage exemptions on IRS Form 8965, Health Coverage Exemptions, and attach it to your Form 1040, Form 1040A, or Form 1040EZ income tax return. These forms all can be filed electronically.

If you are granted a coverage exemption from the Marketplace, you should receive a notice with your unique Exemption Certificate Number or ECN. You will enter your ECN in Part I, Marketplace-Granted Coverage Exemptions for Individuals, of Form 8965 in column C. If the Marketplace has not yet processed your exemption application before you file your tax return, the IRS instructs individuals to complete Part I of Form 8965 and enter “pending” in Column C for each person listed.  If you claim the exemption on your return, you do not need an ECN from the Marketplace. With the tax filing season underway, most exemptions for 2014 are only available by claiming them on your tax return.

If your income is below your filing threshold and you are not required to file a tax return, the IRS advises that you still are eligible for an exemption and you do not have to file a tax return to claim it. If you choose to file a tax return, you will use Part II, Coverage Exemptions for Your Household Claimed on Your Return, of Form 8965 to claim a health coverage exemption. Other IRS-granted coverage exemptions may be claimed on your tax return using Part III, Coverage Exemptions for Individuals Claimed on Your Return, of Form 8965. For a coverage exemption that you qualify to claim on your tax return, the IRS advises that all you need to do is file Form 8965 with your tax return—remember that you do not need to contact the IRS to obtain the exemption in advance.

The IRS encourages taxpayers and their tax professionals to consider filing returns electronically. There are a variety of electronic filing options, including free volunteer assistance, IRS Free File for taxpayers who qualify, commercial software, and professional assistance. Using tax preparation software can be an effective and simple way to file a complete and accurate tax return since it guides individuals and tax preparers through the process and does all the math; however, simple software without professional assistance also can suffer from the problem of “garbage in, garbage out,” meaning inaccurate information entered into the program often will lead to inaccurate results on the tax return. Accordingly, individuals also should strongly consider the assistance of a professional tax preparer. (For tips on how to choose a tax return preparer, see the separate article, “Tips to Help You Choose a Tax Return Preparer.”)

For more information about the Patient Protection and Affordable Care Act and filing your 2014 income tax return, contact your professional tax advisor or tax preparer, or call Hertsel Shadian, Attorney at Law, LLC at (503) 352-6985. More information also is available at www.IRS.gov/aca. Please also feel free to share this article with your social networks and anyone that might benefit from this information.