Decoding Your Taxes, Health Care Law
Jan 25, 2015 08:19AM
By Jennifer Neys
You don't need to be an expert on taxes or the new health care law to get it right. The Internal Revenue Service, in partnership with industry-leading companies, is offering free tax software that will do the hard work for you. It's called Free File, and it's available only at IRS.gov/freefile. Learn more at freefile.irs.gov.
If you earned $60,000 or less - and 70 percent of us do - you are eligible for Free File's brand-name software. If you made more than $60,000, you still have a free option in Free File Fillable Forms. This is the electronic version of IRS paper forms. It's pretty basic, so this program is best for people comfortable doing their own taxes.
Free File's software programs will help you find the tax benefits you are due, help pick the right tax forms, and do the math for you. This year, Free File also helps you complete information on your return that is related to the Affordable Care Act. When it comes to the health care law, almost everyone will need to do something new when filing a tax return this year. For each month in 2014, you and everyone on your return will need to do one of the following:
- Report healthcare coverage
- Claim an exemption from coverage
- Make a shared responsibility payment with your tax return
Free File software will ask all the right questions; you supply the answers. More than 43 million people have used Free File since it started in 2003. They have saved $1.3 billion in tax preparation fees - simply by doing it themselves. Getting started is easy:
Gather your tax-related documents
Collect the tax materials needed to do your taxes. Here's what you'll need:
- A copy of last year's tax return
- Valid Social Security numbers for yourself, spouse and children
- All income statements, i.e. W-2 forms, from all employers
- Interest and dividend statements, i.e. 1099 forms
- Form 1099-G showing any state refunds
- Unemployment compensation amount
- Form 1095-A, Health Insurance Marketplace Statement, if you purchased coverage from a Health Insurance Marketplace
- Records of your own and your family members' health care insurance coverage, including employer provided, government, Marketplace or private coverage
Choose a brand-name software product
Once you've gathered your materials, go to IRS.gov/freefile to review the 14 company offerings. Each company sets its own criteria, usually based on age, income or state residency. You can either use a "help me" tool that will match software with your situation or you can review each of the company offerings. Most companies also offer state returns, some for free.
Again, if your income was higher and you are comfortable preparing your own taxes, Free File Fillable Forms may be right for you.
Find tax credits
Then, let Free File do the hard work for you. Free File software can guide you through finding tax breaks, and help you receive a more accurate refund. Some people may not even be aware that they qualify for a tax credit.
For example, the IRS estimates that one out of every five taxpayers eligible for the Earned Income Tax Credit, a refundable credit for taxpayers with moderate income, fail to claim it.
If you or anyone on your return purchased health care coverage from the Health Insurance Marketplace, you may qualify for the premium tax credit. If you chose to have advance payments of the premium tax credit sent to your insurance provider in 2014, you must file a tax return. You must reconcile, or compare, the advance credit payments with the actual premium tax credit you are allowed to claim on your return. Learn more at IRS.gov/aca.
Get your refund faster
Once you've completed your return, you can also print a copy and e-file your federal taxes, absolutely free. With electronic filing, you will receive a confirmation within minutes that the IRS has accepted your return. Or, if it's not accepted, you can easily find out why. E-file helps make your tax return even more accurate, which means a quicker refund. To get your refund even faster, combine e-file with direct deposit.
The Free File software - designed to provide a fast, safe and free filing option - is available online 24/7, giving you the freedom to choose when and how you do your taxes.
Health Care Law
Everyone needs to understand how the health care law affects tax returns. You will need to complete one of the following steps, and using Free File, brand-name software makes it easier for you.
Reporting health care coverage
If you and everyone on your tax return had health care coverage for all of 2014, simply check the "full year coverage" box when completing your return in the Free File software. For most people, that's it!
Claiming a Coverage Exemption
If you did not have health care coverage for all or part of 2014, you may qualify for a coverage exemption. Free File will help you complete Form 8965 and file it with your tax return.
Making a shared responsibility payment
If you or your dependents had neither health care coverage nor an exemption, you may need to make a payment with your tax return. Free File will help you calculate your payment and report it on your tax return.
About the Premium Tax Credit
If you or anyone on your return purchased insurance coverage from the Marketplace, you may be eligible for the premium tax credit. If you chose to have advance payments of the premium tax credit sent to your insurer in 2014, you must reconcile or compare the advance credit payments with the actual premium tax credit you are allowed to claim on your return.