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ACA & the Tax Season
2014 Assets Learning Conference
Tara Straw
September 17, 2014
Reporting Coverage on the Form 1040
There is a requirement to have health insurance coverage starting Jan. 1, 2014.
2
See Step 2. Determine whether any person on the return
can be exempt from penalty. (Form 8965)
Exemptions?
From the IRS?
From the Marketplace?
Step
2
If no coverage and no exemption, calculate Individual
Responsibility Payment using tax worksheet. Step
3
Step
1 Did everyone on the tax return have coverage all year?
YES
NO
Did everyone on the tax return have coverage all year?
• Tax volunteer will complete a section of the intake sheet during the
taxpayer interview:
• To count, the coverage must be “minimum essential coverage”
(MEC)
– The vast majority of coverage will qualify as MEC or will earn the
taxpayer relief from the 2014 individual responsibility payment.
3
Did you, your spouse and everyone claimed as a dependent have health coverage in 2014?
Yes, coverage all year Coverage part of the year No coverage at all I qualify for an exemption
EXEMPTIONS
Exemption Granted by the Marketplace
People who were granted an exemption will
receive an ECN (exemption certificate
number), a 6 digit letter/number code.
5
Form 8965 – Part I Exemptions Granted by the
Marketplace
Types of Exemption
• Hardship, including:
– Life circumstances
– Insurance is unaffordable (based on
projected income)
– State failure to expand Medicaid
– Eligible for Indian Health services
– Plan cancellation
• Member of certain religious sects
• Incarceration
• Membership in an Indian tribe
Exemptions Granted by the IRS
Form 8965 – Part II Coverage Exemptions for Your
Household
Type of Exemption
• Income below filing threshold
Exemptions Granted by the IRS
Form 8965 – Part III Coverage Exemptions for
Individuals on Your Return
Types of Exemption
• Insurance is unaffordable (based on
actual income)
• Certain noncitizens
• Short coverage gap (< 3 months)
• Months prior to effective date of MEC
that is effective on or before May 1,
2014
• Incarceration
• Membership in an Indian tribe
People who are eligible for exemption from
the IRS will enter an exemption type (A-F).
INDIVIDUAL RESPONSIBILITY
PAYMENT
Individual Responsibility Payment
Individual Responsibility Payment†
Year If income is above filing threshold, the penalty is the greater of...
2014 NO PENALTY if income is less
than filing threshold
In 2014:
Single $10,150 MFJ $20,300
$95 per adult, $47.50 per child (up to $285)
or 1% of income above the tax filing threshold*
2015 $325 per adult, $162.50 per child (up to $975)
or 2% of income above the tax filing threshold*
2016 $695 per adult, $347.50 per child (up to $2,085)
or 2.5% of income above the tax filing threshold*
2017 Values are increased by a cost of living adjustment
† The penalty calculation is for a person who is uninsured all year. If a person is uninsured for only some months, prorate the payment. *Capped at the national average premium of a bronze level plan purchased through a Marketplace.
Calculate Individual Responsibility Payment for a taxpayer, spouse or dependent who
is uninsured, has income above the filing threshold and is not eligible for an exemption.
1. $17,000 - $10,150 =
2. $95 x 1 adult =
Example #1: John (Single)
Income: $17,000 (148% FPL)
Filing Status: Single
Adults: 1
Children: 0
$6,850
x 1%
$68.50
$95.00
Report on F1040, Line
61
Tax Filing Threshold: $10,150
Months Uninsured: 12
10
95
$0
$100
$200
$300
$400
$500
$600
Calculating the Payment
Single
$10,150
$19,650
$95/adult
1% of income
no penalty
1% of income (above threshold) $95
no penalty
Household Income
Tax
Pe
nal
ty
11
The tax penalty is prorated for the number of months
without coverage during the tax filing year
Calculating the Payment
Partial Year Coverage
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Gets a job with employer coverage
Uninsured for 7 months
Penalty = 7/12 of annual penalty calculation
12
PREMIUM TAX CREDIT
Premium Tax Credit (PTC)
Eligibility
• Filing status/dependency
– Cannot be claimed by a dependent
– Cannot be married filing separately
• Exceptions for domestic violence and abandoned spouses
• Enrolled in a plan through a marketplace
– Marketplace prohibits enrollment of people who are:
• Incarcerated or Undocumented immigrants
– However, family members of those individuals may enroll
• Household income between 100% and 400% of the
federal poverty level (FPL)
– Lawfully residing immigrants who are ineligible for Medicaid are
eligible even if income is below 100% FPL
• Not eligible for other public or employer-sponsored
coverage
Premium Tax Credits
• Determine PTC
eligibility
• Determine PTC
amount
• Reconcile that
amount with any
PTC taken in
advance
Premium Tax Credit
Limitation on Repayment
Household Income Limitation for Single, MFS, HoH taxpayers
Limitation for all others
Less than 200% FPL $300 $600
200% but less than 300% FPL $750 $1,500
300% but less than 400% FPL $1,250 $2,500
*If income is greater than 400% FPL, all PTC must be repaid.
If a taxpayer claimed too much PTC in advance, some or all of the overpayment must be paid back.
Coming Soon
• IRS Materials
– IRS forms and instructions
– VITA training and testing
• CBPP Materials
– VITA Basic & Advanced training slides
– Training webinars
– Tools to facilitate discussions with taxpayers
– Advice and answers during the tax season through weekly
emails
Contact Information
Tara Straw
Center on Budget and Policy Priorities
For more information and resources, please visit:
www.healthreformbeyondthebasics.org
This is a project of the Center on Budget and Policy Priorities www.cbpp.org
For health reform basics, our Refresher webinar series starts October 9. A VITA-specific webinar series begins in mid-October.
Email [email protected] to be notified of future VITA webinars & materials.