By Erin Hemlin
Erin Hemlin is Director of Training and Consumer Education at Young Invincibles. In that capacity, Erin leads YI's training and education efforts nationally through webinars, in-person workshops, and partnerships to increase health literacy and build consumer awareness among her Millennial peers.
Thanks to the Affordable Care Act (ACA), millions of young adults have gained and maintained health care coverage. A big reason for that is the availability of tax credits created by the ACA that make health care plans more affordable for low-and-middle income Millennials. For example, a 27-year-old living in Arlington, Virginia making about $20,000 a year - let's call him Bobby - could purchase a silver-level health plan that would normally cost $230 per month for just $83 per month after tax credits are applied. That's a lot of savings.
One of the greatest aspects of these tax credits is that they are advancable. What does that mean? Unlike the majority of tax credits created by the federal government, these tax credits can be applied directly to Bobby's premium every month. And Bobby won't have to wait until the end of the year to see that money come back.
Now that it's tax time, Bobby will have to reconcile the tax credits he received in 2015. Because tax credits are based on "projected income," the amount of tax credits an individual should have received may vary from what they actually received throughout the year. For many young adults working in jobs where the hours vary from one week to the next, it can be difficult to accurately predict yearly income. So, if Bobby estimated he'd make more money than he actually did, he would be eligible for a bigger tax credit, and should see some of that money come back on his tax return. Alternatively, if he projected his income to be lower than it actually was, he would have received more tax credits than he should have, and he will have to pay that money back.
Penalties and such.
Tax season doesn't only affect those with marketplace coverage who receive tax credits. Individuals who did not have health insurance in 2015 may be subject to a penalty. The law states that all individuals must have health insurance now or they will have to pay a fee, with some exceptions.
We saw the first implementation of the penalty last tax season. A single individual who did not maintain coverage in 2014 had to pay a flat penalty of $95, or one percent of their income--whichever was greater. The penalty increased last year as well -- so as consumers file their 2015 tax return this spring, those who went without insurance in 2015 will face a penalty of $325 or two percent of their income. Next year, it gets even bigger - not having insurance for all of 2016 could land you a penalty of $695 or 2.5 percent of your annual income. Yikes. Take Bobby for example: If he didn't have insurance for all of 2014, he would have paid a penalty of $99. By 2016, he'd be paying $695 just for not having health insurance. A hefty fee for someone making $20,000 a year.
Need Help? We got you covered.
Luckily, there's help for young adults trying to navigate the complicated worlds of health care and taxes. There are two main types of experts who can assist you: certified enrollment assisters, and tax preparers.
Certified enrollment assisters can help with:
- Applying for private health coverage through the marketplace
- Medicaid and CHIP applications
- Applying for an exemption for not having health coverage through the marketplace
Tax preparers can help with:
- Applying for an exemption for not having health coverage on your tax return
- Reconciling tax credits
- Completing tax forms to show you maintained coverage
There are even tax preparers who can help consumers file their tax return for free. The Volunteer Income Tax Assistance (VITA) program offers free help preparing your taxes for individuals making about $54,000 a year or less. VITA can be a great resource to get free, reliable help. But no matter where you seek help with your taxes, be sure to protect yourself from fraud. Keep in mind that a penalty or fee for not having insurance should never go to a tax preparer directly; it should only go to the IRS.
Click here to learn more about VITA services or to find a tax prep event near you.
To find an in-person assister near you, click here.
Remember: Act fast! The deadline to file your taxes is April 15th!