Getting the Right Tax Credit


taxcreditTax credits are available to help lower the cost of health care for individuals and families who enroll in a Covered California health plan and meet certain income requirements. Individuals must also not have an offer of affordable health insurance from an employer or from the government.

  • Premium assistanceis a federal tax credit you can receive in advance or at tax time that helps make the amount you pay for your insurance each month lower. How much advance premium tax credits you receive is based on how much money you make, your tax household size and where you live.
  • You may also be receiving cost-sharing reductions. This type of financial help lowers the part you pay when you visit a doctor or hospital or fill your prescriptions.

You cannot apply premium assistance or cost-sharing subsidies to a minimum coverage plan (also known as a catastrophic plan).

Why is it important to accurately report my income and household size?

If you receive help making your insurance more affordable, you need to file taxes. When you file, the Internal Revenue Service (IRS) will check to see if the amount of income you reported to Covered California is the same as the amount of income you actually made. The IRS will also check to see if your family size is the same as when you applied. The IRS will then compare the advance premium tax credits you received during the taxable year with the premium assistance that you qualify for based on the actual household income and family size you reported on your tax return. This is known as reconciliation.

It is possible that you will qualify for more premium assistance than you received because at the end of the year your income was lower or your tax household size was larger than what you reported to Covered California. If this happens, you may get money back when you file your taxes.

It is also possible that you qualify for less premium assistance than you received
because at the end of the year your income was higher or your tax household size was smaller than what you reported to Covered California. If this happens, when you file taxes you will have to repay the extra amount you received.

Every year, Covered California will send enrollees a tax form called a Form 1095-A, which you will need when filing 1095 formyour taxes. This form helps to determine whether you received too much or too little financial assistance in paying for your insurance premium. Your 1095-A shows what Covered California paid to your insurance company in 2014 to help you with the cost of your health coverage. The amount paid was based on the income information and household size you provided. If your income changed, you may have paid too much or too little for your health coverage.

 What can I do to avoid owing money when I file my taxes?

  • If you have a change in your application information, you must report the change to Covered California within 30 days. Also, if Covered California asks you to provide documents that verify your income, you must do so by the dated listed on your notice.
  • If you are worried about owing money at tax time, you can choose to take less of the advance premium tax credit each month. Your monthly premiums will still be lower, but not as much. By taking less credit during the year, there is less chance you will owe back money at tax time.
  • You can also choose to pay the full premium amount each month. If you choose this option, when you file your taxes you would subtract your tax credit from the tax you owe — or get a bigger refund if you didn’t owe anything.

Covered California Messed Up My Tax Form! What Should I do?

taxFor people in about 100,000 California house-holds, taxes just got a bit more complicated. Here’s the gist: Everyone who purchased health insurance through the state-run exchange received a tax form from Covered California. Except some of those forms were wrong. Now, the agency is scrambling to send out new, accurate forms. Something similar happened at the federal level, too. had to send out corrected tax forms to more than 800,000 taxpayers in states where the federal exchange is active

What went wrong?
The Covered California errors revolve around inconsistencies of enrollment in subsidized health insurance plans. For instance, someone may have been
enrolled for only three months but the tax form says they were enrolled for six months. (The federal problem was different – it was about incorrect pre-
miums on the forms). Covered California’s mistake matters because the amount a household owes in taxes will depend on the amount of subsidy they received. And if the form – known as a 1095A – says they received more than they really did, their tax rate will be based on those erroneous figure.
What has Covered California had to say about this?
This is the first time Covered California has issued these tax forms and they said they are still working out the process. Covered California spokesman James Scullary explained it this way: “We are dealing with a multitude of information that is going back and forth, depending on when people enroll, coverage times, when their payment is made. There can be discrepancies between what’s on our record and what is on the health
plans’ records.
How is Covered California working to fix it?
The agency says it’s reconciling the data they have with the insurance companies to be sure everything is accurate on the corrected forms. And they say
the corrected tax forms should arrive in late February or early March. Are consumers going to get their corrected forms before tax day and can those affected get an extension on their taxes? But if consumers think they are going to need more time, they should check with their accountant or the IRS
about filing for a tax deadline extension.
If the government thinks a consumer was on the program longer than they really were, is the insurance company benefiting from the incorrect subsidy?
Covered California’s Scullary says it’s not likely – but he didn’t rule it out. “I suppose that’s possible but certainly… the health insurance companies will have a reconciliation with the IRS just as we do and all the information is going to have to align,” he says. Scullary says the federal government disburses the subsidy dollars to the health insurance companies, based on reports they get from Covered California.
So what should consumers do if they received a postcard or believe their tax form is wrong?
There are three categories of consumers that we are talking about here. For the record, we are not talking about those who received a correct form and who can go ahead and file taxes.
-Consumers who received a correction postcard from Covered California and who have not filed taxes, should wait for the new tax form before filing their taxes, says Scullary.
-Those who received a correction postcard from Covered California after filing their taxes, should wait for Covered California to send them the corrected form. Then, they should take it to their tax agent to find out if they need to amend their taxes, the agency says.
-The third group are households who did not receive a postcard but believe their tax form is incorrect. Covered California says they should submit a dispute form and explain the discrepancies between the agency’s form and their personal records. Covered California says it will review and respond to all disputes.
I hear the IRS is giving people who used the federal exchange a break. Does that mean we get
one too?
No, Californians are not included. It’s true that the federal government announced that those who already filed taxes using erroneous forms do
not have to file amend returns, even if they owe more. But that applies only to people who used the federal exchange.
So California taxpayers, if you already filed your taxes you have to wait for the corrected form and file an amended return if you determine that the amount you owe has changed.
Please feel free to call us at (909) 792-3302 for any questions you may have regarding this article.
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