April 15 may seem far away, but it is not too soon to think about your 2014 tax bill if you purchased health insurance through a state- or federally run health insurance exchange.
If you’re getting help paying for your coverage in the form of tax credits that subsidize your monthly insurance premium, you must report any changes that could affect either your eligibility for a subsidy or the amount of subsidy you receive.
Since the dollar amount of any subsidy you receive is calculated based upon your household size and income, any life change that alters that calculation will, in turn, change the amount of subsidy to which you’re entitled.
If your income has risen since you got your health insurance — making you either no longer eligible for a subsidy or eligible for a lower subsidy amount — the IRS expects to collect any extra money you may have received.
For example, getting a raise, changing jobs, adding a second (or third) job, your spouse getting a better-paying job, having a better year in sales than expected — these are all things that would mean more income in your pocket. And this means you qualify for a lower subsidy amount.
If you don’t report such a change and instead continue to collect your original higher subsidy amount, the IRS will make you repay the amount you owe back by adding it to your 2014 tax bill. If you are expecting a refund, it will be reduced by this amount. If you expect to owe money, your bill will be that much higher.
How to Report Income or Life Changes
If you purchased your coverage through healthcare.gov, you must report income or life changes either online or by phone.
Online: Visit healthcare.gov. Select “Report income or life changes” and follow the instructions. You will need your login information and password to access your account.
By Phone: Call the Marketplace Call Center at 1-800-318-2596.
What Kinds of Changes Must be Reported
According to healthcare.gov, you must report a change if you:
- Get married or divorced
- Have a child, adopt a child, or place a child for adoption
- Have a change in income
- Get health coverage through a job or other program like Medicaid or Medicare
- Move to a new place of residence
- Have a change in disability status
- Gain or lose a dependent
- Become pregnant
- Have any other change that may affect your income and household size
- Have a change in tax filing status
- Have a change in citizenship or immigration status
- Become incarcerated or are released from incarceration
- Have a correction to a name, date of birth, or SSN
- Have a change in tribal status or status as an American Indian/Alaska Native
Be sure to notify the exchange immediately if you experience any of the above. If the subsidy amount you’re entitled to has changed, you can adjust the amount of credit applied to your monthly premiums and avoid a large tax bill next April.
Some changes will trigger a special enrollment period (SEP) during which you can choose a new plan. For more information on SEPs, click here.
Let us know if you have any questions. We are happy to help!
(You can also read more about this in an earlier post on our site.)