One of the first questions you will need to answer to purchase insurance on or off the new exchanges is your income. You can skip this question if you don’t want to claim an advance tax credit (subsidy) — but even the private insurance companies will encourage you to provide enough information to determine if you are eligible for a subsidy.
If you enroll via an exchange and opt to take a subsidy, that will be reconciled the following year when you file your tax return. If it turns out that your tax returns show that your 2014 income is higher than the number you reported, you may have to pay back some or all of the subsidy you receive in the form of a tax payment due in April 2015. If it turns out that your income is less — or if you enrolled via an exchange but opted not to take an advance tax credit — then you may be entitled to an additional tax credit, that will be paid to you in the form of a tax refund.
So it is important to get things right: but if you are applying for insurance now, you are answering questions about 2013 income when, in the end, it will be your 2014 income that counts. You will be able to report any changes of income during the year, but that could end up being rather cumbersome if you have some types of income that are fluctuating or subject to change – for example, if part of your earnings depends on earning commissions, or your work hours vary from one week to the next.
This is a complicated topic, but I will start by breaking it down in steps: