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Regulation and Compliance > Federal Regulation > IRS

Form 8965: IRS revises PPACA mandate escape guide

By Allison Bell

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The Internal Revenue Service (IRS) has ended Patient Protection and Affordable Care Act (PPACA) tax form watchers’ suspense by releasing an eagerly awaited draft of the 2015 instructions for Form 8965.

Individual and families will use Form 8965 to claim some exemptions from the PPACA individual health insurance coverage mandate for 2015 and to notify the IRS of the existence of exemptions provided by the PPACA public health insurance exchange system.

Individuals and families will also use the form to calculate and pay the “individual shared responsibility” penalties now imposed on affected taxpayers who fail to have what regulators classify as minimum essential coverage (MEC) for enough of the year.

See also: IRS explains PPACA for plain folks

The IRS posted a version of the 19-page instructions draft packet on the Web in mid-August, then took the draft off. The agency replaced the draft with small placeholder graphic promising, “This product will be posted on IRS.gov soon.”

See also: IRS tantalizes 8965 PPACA form watchers

The next tax filing season will be the second for Form 8965. The federal government introduced the PPACA public exchange system and the PPACA premium tax credit subsidy program in January, and individual taxpayers began seeing and filling out PPACA-related tax forms earlier this year.

The IRS received fewer PPACA-related tax filings for 2014 than it expected, and some have speculated that consumer confusion about the forms, and overall inability to handle paperwork, may have contributed to compliance problems.

See also: 3 IRS PPACA World revelations

For the 8965 form’s second year, the IRS is thinking of adding a small infographic at the top that summarizes three key points. The infographic informs taxpayers that:

For each month, you must either:

    • Have Health Coverage, or

    • claim a coverage exemption on Form 8965, or

    • make a shared responsibility payment.

Drafters have also tweaked the list of exemptions to reflect the end of some temporary mandate exemption options, such as use of employer coverage with non-calendar plan years beginning in 2013.

At the end of the instructions, the drafters have added a flowchart-like worksheet that taxpayers can use to figure their penalty payments.

The drafters tried to make the long columns of text in the original version of the instructions easier to understand by making each step in the new worksheet very short, and using white space to set each step apart from the others.

The first question is, “Can someone claim you as a dependent?”

In another new feature, a collection of advice on “How to avoid common mistakes,” the IRS cites confusion about the effects of dependent status as a common penalty calculation problem.

“Make sure you can’t be claimed as a dependent on another person’s tax return,” the IRS says in the new draft instructions. “You do not owe a shared responsibility payment if you can be claimed as a dependent by another taxpayer.”

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