Are you getting your healthcare through Covered California? While the subsidies can make health insurance more affordable, a hidden tax pitfall could leave you with an unexpected bill come tax season. Understanding the intricacies of the Advanced Premium Tax Credit (APTC) and how changes in your income can impact your taxes is crucial to avoid financial surprises. Let’s delve into how you can safeguard yourself from this common issue.
What is the Covered California Tax Pitfall?
Form 1095-A is a federal tax document that verifies your health insurance coverage through Covered California. It includes details about your premium payments, coverage dates, and any financial assistance you received. This form is essential for claiming the Advanced Premium Tax Credit (APTC) on your tax return. Failure to report accurate income can result in owing the IRS hundreds or even thousands of dollars.
How Do Income Changes Impact Your Subsidies?
If your income changes and you don’t report it to Covered California, you might receive more financial assistance than you’re eligible for. This overpayment has to be repaid to the IRS, which can result in a hefty bill. In fact, 415,000 California households collectively owed the IRS close to $690 million due to subsidy overpayments.
What Types of Changes Should Be Reported?
To avoid the Covered California tax pitfall, it’s crucial to report any changes in:
- Employment Status: Losing or starting a new job, changing from full-time to part-time.
- Income Levels: Receiving a raise, starting a new business, or receiving rental income.
- Household Size: Getting married, having a child, or someone moving in or out of your household.
- Eligibility for Other Insurance: Becoming eligible for Medicare or another insurance plan.
When Should You Report Income Changes?
Reporting changes in your income as soon as they occur but no later than 30 days after ensures that your financial assistance is accurate. This timely reporting helps you avoid the Covered California tax pitfall by ensuring you neither overpay nor underpay your monthly premiums.
What If Your Income Is Less Than Reported?
If your actual income turns out to be less than what you reported, you may be eligible for a larger tax credit. For example, if you reported an expected income of $100,000 but your actual income was $80,000, you could receive an additional tax credit. This adjustment can significantly impact your overall tax bill and potentially provide you with a refund.
How to Update Your Information with Covered California?
Updating your application or profile with income changes is a straightforward process that can save you money in the long run. Here’s what you need to do:
- Log in to Your Account: Access your Covered California account online.
- Update Income Information: Enter the new income details accurately.
- Submit Changes: Ensure that changes are submitted at least 30 days after they occur.
Why Choose Skyline Benefit for Assistance?
At Skyline Benefit, we specialize in navigating the complexities of Covered California and can help you avoid the tax pitfall associated with inaccurate income reporting. Our expert team provides personalized guidance to ensure your health insurance coverage is optimal and your financial assistance correctly aligns with your income.
Avoid the Covered California Tax Pitfall
Getting your healthcare through Covered California requires careful management of your income reporting to avoid unexpected tax bills. By understanding the importance of Form 1095-A, promptly reporting income changes, and seeking professional assistance, you can confidently navigate the Covered California tax pitfall. For any questions or assistance, contact Skyline Benefit, your trusted agent, and ensure your financial and health security today.
Need Help with Avoiding the Covered California Tax Pitfall?
Skyline Benefit is a certified insurance agency with Covered California. Act now and get the premium subsidy and coverage that you deserve.
Our agents can review your medical needs and budget, and tailor your health insurance options during Covered California Open Enrollment.
Call us now at (714) 888-5112