Compliance Alert: The Tax Consequences of Divorce or Separation

After a divorce or separation, many don’t realize the tax implications. Alimony and a name change are just a few items individuals may need to consider. Here are some key tax tips to keep in mind from the Internal Revenue Service (IRS) regarding the Affordable Care Act (ACA) for those who are recently divorced or separated.

* Special Marketplace Enrollment Period – If you lose your health insurance coverage due to divorce, you are still required to have coverage for every month of the year for yourself and the dependents you can claim on your tax return. Losing coverage through a divorce is considered a qualifying life event that allows you to enroll in health coverage through the Health Insurance Marketplace during a Special Enrollment Period.

* Changes in Circumstances – If you purchase health insurance coverage through the Health Insurance Marketplace, you may get advance payments of the premium tax credit in 2015. If you do, you should report changes in circumstances to your Marketplace throughout the year. Changes to report include a change in marital status, a name change and a change in your income or family size. By reporting changes, you will help make sure that you get the proper type and amount of financial assistance. This will also help you avoid getting too much or too little credit in advance.

* Shared Policy Allocation – If you divorced or were legally separated during the tax year and are enrolled in the same qualified health plan, you and your former spouse must allocate policy amounts on your separate tax returns to figure your premium tax credit and reconcile any advance payments made on your behalf. Publication 974, Premium Tax Credit, has more information about the Shared Policy Allocation.

For more on this topic, see Publication 504, Divorced or Separated Individuals. You can get it on IRS.gov/forms at any time.

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