ACA and Your Taxes

The Affordable Care Act (ACA) (also known as "Obamacare") and your tax return.

The preparation of your tax return will be affected by the ACA. Although we have little control over how the law may impact you financially on your return, we want to make sure that any additional time required preparing your return as a result of ACA, and thus any additional charges, are kept to a minimum to save you money.

This means you have to be organized with any materials we require to finish your return. Unlike years past when we bent our rules to allow clients to return with missing materials even if it required more time to finish the return, this year, as a result of the additional time we expect every client to require, we simply don’t believe we will have the time available as we have in the past.

We do not intend to put all of the information available to fully understand the ACA provisions on these pages; the volume is overwhelming. We are only concerned with providing the minimum information required for you to understand how ACA will impact your taxes. If you feel you need more information please go to our website, where we have placed a greater amount of information (www.chucksloan.com), if you live in California then visit www.coveredca.com), the IRS website (http://www.irs.gov/Affordable-Care-Act) or visit the national healthcare website at www.healthcare.gov.

The bulk of the presentation below has been compiled from those sources. We are not taking any editorial stance.

The bottom line is: To save yourself any additional charges, please make sure you are completely prepared before you come in for your appointment. We are going to have to charge for appointments taking longer than 90 minutes and return visits (in fifteen minute increments).

WHAT IS THE AFFORDABLE CARE ACT (ACA)

The Affordable Care Act addresses health insurance coverage and financial assistance options for individuals and families, including the premium tax credit. It also includes the individual shared responsibility provision and coverage exemptions from that provision.

The individual shared responsibility provision requires every U.S. taxpayer and their dependent(s) to

•           Have qualifying health care coverage, also called minimum essential coverage, or

•           Qualify for an exemption from the responsibility to have minimum essential coverage, or

•           Make an individual “shared responsibility payment” (we call it a fine) when filing their federal income tax return.

•           Taxpayers will report minimum essential coverage, report exemptions, or make any individual shared responsibility payment when filing their federal income tax return.

WHO MUST HAVE HEALTH CARE COVERAGE?

In general, all U.S. taxpayers are subject to the individual shared responsibility provision. Under the provision, a taxpayer is potentially liable for him or herself, and for any individual the taxpayer could claim as a dependent for federal income tax purposes. Thus, all children generally must have minimum essential coverage or qualify for a coverage exemption for each month in the year. Otherwise, the primary taxpayer(s) (e.g., parents) who can claim the child as a dependent for federal income tax purposes will generally owe an individual shared responsibility payment for the child.

Senior citizens must also have minimum essential coverage or qualify for a coverage exemption for each month in the year. Both Medicare Part A and Medicare Part C (also known as Medicare Advantage) are minimum essential coverage.

All U.S. citizens are subject to the individual shared responsibility provision, as are all non-U.S. citizens who are in the U.S. long enough during a calendar year to qualify as resident aliens for federal income tax purposes. Foreign nationals who live in the U.S. for a short enough period that they do not become resident aliens for tax purposes are exempt from the individual shared responsibility provision even though they may have to file a U.S. income tax return.

ESSENTIALLY HERE ARE THE RULES.

If you purchased qualifying health insurance for you and your dependents for the full year and you bought it through CoveredCA.com, Healthcare.gov or one of the other state sites (referred to by the government as the “Marketplace”) all you need to do is bring in a new tax form called a 1095-A and you have done everything required for your return. Only after we prepare your return we will learn if you may have received too much or too little “Premium Tax Credit” (assistance from those sites to purchase your health care). If you received too much then you will have to repay the excess. Conversely, if you received too little then you may receive a tax credit on your return.

If you purchased outside of the “Marketplace” then we will have to see some proof of coverage. The IRS recommends the following as examples you may need to prove your insurance coverage:

Documentation may include:

Any Form 1095 and/or
Form W-2 or payroll statements reflecting health insurance deductions and/or
Other documentation that may substantiate coverage, such as:

Medical bills showing that during the tax year an amount due was paid by a health insurance company (indicates coverage)
Documentation/statement from an employer indicating health insurance coverage
Insurance card indicating health Insurance comapny and plan number (preferably last year's if you haven't thrown it away.)
Medicare card

Until we have your 1095 form or other information proving coverage we cannot finish your tax return If you are claiming you had insurance coverage for last year. If you have to return for a second visit with additional materials then we will have to charge you for the additional time. We don’t want to do that so please, be prepared. (The Form 1095 A must be issued by January 31st which means most taxpayers should receive their copy by the first week of February.)

IF YOU DIDN’T HAVE QUALIFYING HEALTH INSURANCE FOR THE FULL YEAR

If consumers do not maintain minimum essential coverage during a particular year and they do not qualify for an exemption, they will need to pay a “shared responsibility payment” to the IRS on their tax return for that year.

For Tax Year 2015, the Annual payment amount is:

Whichever of these is GREATER

For low income earners your family’s flat dollar amount, which is $325 per adult and $162.50 per child, to a maximum of $975.

OR
2 percent of your household income that is above the tax return filing threshold for your filing status.
But the amount is capped at the cost of the national average premium for a bronze level health plan available through the Marketplace in 2015.

(NOTE: For tax year 2016, the penalty will rise to 2.5% of your income, or $695 per adult and $347.50 per child, to a maximum of $2,085.)

THE PENALTY IS DETERMINED BY THE INCOME FROM ALL MEMBERS OF THE FAMILY

If you have members of your family who also earn an income (i.e. spouse or children) their income must be included in the total Modified Adjusted Gross Income (MAGI) used to determine the tax penalty.

AS A RESULT WE MUST PREPARE THE TAX RETURNS OF YOUR CHILDREN FIRST SO WE CAN ADD THEIR INCOME TO THE TOTAL FAMILY INCOME.

EXEMPTIONS TO THE TAX PENALTY

If consumers qualify for an exemption from the individual mandate, they will not have to obtain health insurance. The exemptions to the Tax Penalty are as follows:

·    Religious conscience. Members of a religious sect or division thereof that has been in existence at all times since Dec. 31, 1950, and is already recognized by the Social Security Commissioner as conscientiously opposed to accepting any insurance benefits, including Social Security and Medicare. The Social Security Administration administers the process for recognizing these sects according to the criteria in the law.

·    Health care sharing ministry. Members of a recognized health care sharing ministry.

·    Indian tribes. Members of a federally recognized Indian tribe or eligible for services through an Indian Health Services provider.

·    No filing requirement. Income is below the minimum threshold for filing a tax return. The requirement to file a federal tax return depends on a consumer’s filing status, age and types and amounts of income. To find out if they are required to file a federal tax return, use the IRS Interactive Tax Assistant (ITA).

·    You’re uninsured for less than 3 months of the year

·    Hardship. Consumers have experienced difficult, financial or domestic circumstances that prevents them from obtaining coverage – such as homelessness, the death of a close family member, bankruptcy, substantial recent medical debt, or disasters that substantially damage a person’s property.

·    The lowest-priced coverage available to you would cost more than 8% of your household income. In California, the lowest cost plan would be the lowest-cost Bronze plan available to the individual.

·    Incarceration. Consumers are in a jail, prison, or similar penal institution or correctional facility after the disposition of charges (or judgment) against them.

·    Not lawfully present. Consumers are not U.S. citizens, a U.S. national, or an alien lawfully present in the U.S.

HARDSHIP EXEMPTIONS

If any of the following circumstances apply to you, you may qualify for a “hardship” exemption from the penalty:

·    You were homeless

·    You were evicted in the past 6 months or were facing eviction or foreclosure

·    You received a shut-off notice from a utility company

·    You recently experienced domestic violence

·    You recently experienced the death of a close family member

·    You experienced a fire, flood, or other natural or human-caused disaster that caused substantial damage to your property

·    You filed for bankruptcy in the last 6 months

·    You had medical expenses you couldn’t pay in the last 24 months that resulted in substantial debt

·    You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member

·    You expect to claim a child as a tax dependent who’s been denied coverage in Medicaid and CHIP, and another person is required by court order to give medical support to the child. In this case, you don’t have the pay the penalty for the child.

·    As a result of an eligibility appeals decision, you’re eligible for enrollment in a qualified health plan (QHP) through the Marketplace, lower costs on your monthly premiums, or cost-sharing reductions for a time period when you weren’t enrolled in a QHP through the Marketplace

·    You were determined ineligible for Medicaid because your state didn’t expand eligibility for Medicaid under the Affordable Care Act

·    Your individual insurance plan was cancelled and you believe other Marketplace plans are unaffordable

·    You experienced another hardship in obtaining health insurance

Some of the above exemptions require approval from the Marketplace (Healthcare.gov), the IRS or it may be possible for your preparer to handle it at the appointment. You should consult this chart to make sure you are prepared when you come in and meet with us.

Exemptions
May only be granted by Marketplace

May be granted by Marketplace or claimed on tax return

May only be claimed on tax return

Coverage is considered unaffordable - The minimum amount you would have paid for employer-sponsored coverage or a bronze level health plan (depending on your circumstances) is more than 8 percent of your actual household income for the year as computed on your tax return. Also see the second hardship listed below, which provides a prospective exemption granted by the Marketplace if the minimum amount you would have paid for coverage is more than 8 percent of your projected household income for the year.

Short coverage gap - You went without coverage for less than three consecutive months during the year. For more information, see question 22 of our questions and answers.

Income below the return filing threshold - Your gross income or your household income is less than your applicable minimum threshold for filing a tax return. Learn more about household income.

Citizens living abroad and certain noncitizens - You are:

A U.S. citizen or resident who spent at least 330 full days outside of the U.S. during a 12-month period;

A U.S. citizen who was a bona fide resident of a foreign country or U.S. territory;

A resident alien who was a citizen of a foreign country with which the U.S. has an income tax treaty with a nondiscrimination clause, and you were a bona fide resident of a foreign country for the tax year; or

Not a U.S. citizen, not a U.S. national, and not an alien lawfully present in the U.S.

Members of a health care sharing ministry - You are a member of a health care sharing ministry, which is an organization described in section 501(c)(3) whose members share a common set of ethical or religious beliefs and have shared medical expenses in accordance with those beliefs continuously since at least December 31, 1999.

Members of Indian Tribes - You are a member of a Federally-recognized Indian tribe, including an Alaska Native Claims Settlement Act (ANCSA) Corporation Shareholder (regional or village), or you were otherwise eligible for services through an Indian health care provider or the Indian Health Service.

Incarceration - You are in a jail, prison, or similar penal institution or correctional facility after the disposition of charges.

Members of certain religious sects - You are a member of a religious sect in existence since December 31, 1950, that is recognized by the Social Security Administration (SSA) as conscientiously opposed to accepting any insurance benefits, including Medicare and Social Security.

Aggregate self-only coverage considered unaffordable - Two or more family members' aggregate cost of self-only employer-sponsored coverage exceeds 8 percent of household income, as does the cost of any available employer-sponsored coverage for the entire family.

Gap in coverage at the beginning of 2014 - You had a coverage gap at the beginning of 2014 but were either enrolled in, or were treated as having enrolled in, coverage through the Marketplace or outside of the Marketplace with an effective date on or before May 1, 2014. See this HHS Question and Answer.

General hardship - You experienced circumstances that prevented you from obtaining coverage under a qualified health plan, including, but not limited to, homelessness, eviction, foreclosure, domestic violence, death of a close family member, and unpaid medical bills. Learn more about the criteria for this exemption.

Coverage considered unaffordable based on projected income - You do not have access to coverage that is considered affordable based on your projected household income.

Determined ineligible for Medicaid in a state that did not expand Medicaid coverage - You are determined ineligible for Medicaid solely because the State in which you live does not participate in Medicaid expansion under the Affordable Care Act.

Resident of a state that did not expand Medicaid - Your household income is below 138 percent of the federal poverty line for your family size and at any time in 2014 you reside in a state that does not participate in Medicaid expansion under the Affordable Care Act.

Unable to renew existing coverage - You were notified that your health insurance policy was not renewable and you consider the other plans available unaffordable. See HHS guidance and HHS Question and Answer for more information..

Gap in CHIP coverage - You applied for CHIP coverage during the initial open enrollment period and were found eligible for CHIP based on that application but had a coverage gap at the beginning of 2014. See HHS guidance for more information.

AmeriCorps coverage - You are engaged in service in the AmeriCorps State and National, VISTA, or NCCC programs and are covered by short-term duration coverage or self-funded coverage provided by these programs.

Limited benefit Medicaid and TRICARE programs that are not minimum essential coverage - You are enrolled in certain types of Medicaid and TRICARE programs that are not minimum essential coverage (available only in 2014).

Employer coverage with non-calendar plan year beginning in 2013 - You were eligible, but did not purchase, coverage under an employer plan with a plan year that started in 2013 and ended in 2014 (available only in 2014).

HOW WILL TAXPAYERS REPORT HEALTH CARE COVERAGE EXEMPTIONS OBTAINED FROM THE MARKETPLACE?

Requests for exemptions that can be granted only by the Marketplace should be submitted as soon as possible, so that taxpayers can properly report the exemption on their federal income tax return.

Taxpayers who are granted a coverage exemption from the Marketplace will receive an exemption certificate number (ECN) from the Marketplace. You must bring this number with you to your appointment.

For more information and links to apply for a hardship exemption, visit:

https://www.healthcare.gov/fees-exemptions/

If you have questions about exemptions from the shared responsibility fee, you should call the Federal Marketplace Services at (800) 318-2596.

HOW MUCH WILL YOU OWE?

At best we can provide a rough estimate, essentially based on the same information we have provided here. If you believe you may have to pay a “shared responsibility payment” or may have received too much or too little in the way of “Premium Tax Credit” (assistance to pay for your health insurance) we can only precisely determine those amounts when we have finished your return. The repayment amount or additional credit you may be entitled to are based upon your Modified Adjusted Gross Income (MAGI) and that can only be determined after we complete your return.

If you believe you will owe an amount for the shared responsibility payment (fine for not having insurance) you will have to do the homework to learn whether you qualify for an exemption. We have provided all the information we can on these pages. If your exemption requires approval by Healthcare.gov then you should fill out the necessary forms and mail them into the address provided on the exemption form.

WHAT DO TAXPAYERS DO IF THEY LOST OR NEVER RECEIVED THEIR FORM 1095A OR IF IT IS INCORRECT?

If Form 1095 was lost, never received, or is incorrect, taxpayers should contact their Marketplace directly for a copy (in California that would be www.coveredca.com). If taxpayers experience difficulty obtaining the Form 1095-A, Health Insurance Marketplace Statement, from their Marketplace, they should review the monthly billing statements provided by their health coverage provider or contact the provider directly to obtain the coverage information, monthly premium amount, and amount of monthly advance credit payments made on their behalf.

If you remain confused over your responsibilities under the ACA we suggest you click on this link for a fairly well written (meaning simple, easily read) brochure from the IRS:

Health Care Law: What’s New for Individuals & Families