Applying for the Premium Tax Credit and Reconciling the Advance Premium Tax Credit: What Marketplace Enrollees Need to Know Kyle Brittingham Project Manager, Community Service Society January 28, 2015

• Overview of Reconciling APTC and Claiming PTC

• Terminology

• Concepts You Need To Know – Premium Tax Credits – Individual Shared Responsibility Payment

• New IRS Forms for 2014 – Form 1040 (Modified) – Form 1095-A (New) – Form 8962 (New)

• Questions?

Outline

Process Timeline

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By January 31: NYSOH sends 2014 enrollment information to QHP enrollees in January 2015 *Form 1095-A from NYSOH

February 1-April 15: Consumers reconcile APTC or claim PTC on their federal tax return during tax filing season *Use Form 1095-A from NYSOH to complete IRS Form 8962

Example: Juan is an unmarried adult with no dependents. He lives in Queens and enrolled in a Marketplace plan for 12 months in 2014. When Juan signed up for coverage, he estimated his 2014 income to be $28,000 (244% of FPL). Juan got an APTC of $111.46 per month and used the full amount towards his premium, for an annual total of $1,337.52. When Juan completes his federal tax return, his actual 2014 income is $22,000 (191% FPL). The amount of PTC he is eligible for based on his actual income is $185.83 per month or $2,229.96 for the year.

Terminology: Let’s Talk Terms

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• Internal Revenue Service (IRS): The service of the federal government that collects taxes

• Affordable Care Act (ACA): The health law passed in 2010 • The ACA established Premium Tax Credits to help Marketplace

enrollees pay for the cost of health insurance • Premium Tax Credit (PTC): A credit that is used to help pay for health

insurance • Only for plans purchased through a Marketplace, like

nystateofhealth.ny.gov in New York • This tax credit is claimed:

1) When you file taxes 2) Or in advance during the year

• Second Lowest Cost Silver Plan (SLCSP): Your county’s SLCSP is used to calculate your PTC based on your income

Terminology: Let’s Talk Terms

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• Federal Poverty Level (FPL): The Federal government sets the FPL to define the poverty income level • FPL is a factor for PTC eligibility • A NYSOH enrollee is eligible for PTC with incomes between

100%-400% FPL • Modified Adjusted Gross Income (MAGI): The threshold income level

that is compared to FPL to determine the amount of an enrollee’s PTC

• MAGI is shown on line 37 of the Form 1040 • Minimum Essential Coverage (MEC): Health insurance that meets

minimum standards set by the Federal Government

MAGI Thresholds for 2014

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Maximum Income in 2014 to be eligible for PTC

Must earn 400% of FPL or less

Family Size Max. Income

1 $46,680

2 $62,920

3 $79,160

4 $95,400

5 $111,640

6 $127,880

The Main Tax Form is the 1040

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(Modified) Adjusted Gross Income

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• MAGI is a federal income tax concept:

— PTC eligibility is determined based on 2014 estimated income.

— MAGI is found in a taxpayer’s Form 1040.

• MAGI = Adjusted Gross Income (Line 37) + Modification (adding certain non-taxable income back in).

MAGI

Adjusted Gross

Income (L37)

Non-taxable Social

Security benefits

(L20a minus 20b)

Tax Exempt Interest

(L8b)

Foreign Income (Form 2555)

Other PTC Eligibility Rules

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• Eligibility rules to qualify for the PTC are: Taxpayer must enroll in a health plan through

NY State of Health Taxpayer must be lawfully present in the United

Stated of America Married taxpayers must file a joint return Taxpayer is not eligible for other MEC, like: Employer-Sponsored Coverage Government Sponsored Coverage (Medicaid,

Medicare, VA, CHIP, etc.)

Rules for

Both

• Just for NY State of Health plans

• Not available on catastrophic plans

Rules for the Advance Premium Tax

Credit • Monthly credits that

reduce premiums • Based on estimated

income • Must reconcile

estimated and actual income with IRS

PTC Can Be Applied For Retroactively When Filing Taxes

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Rules for Premium Tax Credit

• Calculated at tax

filing time • Based on actual

income • Not paid in

advance

Rules for PTC v. APTC

APTC v. PTC Timeline

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APTC TIMELINE Taxpayer reconciles estimated income v. actual income Taxpayer receives APTCs

J M A M J J A S O N D F J M A F

2014 2015

Taxpayer applies for PTC using the IRS Forms

PTC TIMELINE Taxpayer doesn’t take APTCs and pays the full monthly premium

J M A M J J A S O N D F J M A F

2014 2015

Reconciliation: Truing Up Those APTCS

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• Enrollment = A taxpayer who gets financial assistance estimates his or her 2014 income to determine the amount of APTC. She takes some, all or none of the APTC.

• 2014 Income = Taxpayer figures out actual 2014 income which may be the same as, more or less than the estimated income.

• Tax Time = Taxpayer reports their actual income and reconciles their PTC in their taxes.

• Remember = No reconciliation is required for PTC if it was not taken in advance. Taxpayers use Form 8962 to claim the credit.

APTC Repayment Cap: Final Wrinkle

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• Enrollee’s income determines whether they will have to pay back excess credits to the IRS.

If your household income is: Filing Single Other Filing Status Less than 200%............................... At least 200 but less than 300%…… At least 300 but less than 400%.......

$300 $750

$1,250

$600 $1,500 $2,500

400 or more…………………………..

Must pay back everything

Must pay back everything

Example: Bob estimates his 2014 income to be $20,000. He is single individual with no dependents, enrolled in a Marketplace plan for all 12 months in 2014 and Bob used $3,458.64 in ATPCs. When Bob did his 2014 taxes, he learned his 2014 actual income was $28,000 (244% of FPL). Based on his actual income, Bob was only eligible for $2,292.24 in APTCs. This means he would have to repay $1,166.40 to reconcile his PTC. However, because his repayment is more than the cap for his income level, Bob needs to only give back $750.

Reminder: What if you were uninsured in 2014?

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Coverage year Whichever is greater

2014 $95 per adult 1% of family income

2015 $325 per adult 2% of family income

2016 $695 per adult 2.5% of family income

• Coverage is required for everyone, unless exempt. • Penalty is prorated by coverage months. • No penalty if uncovered for less than a gap of 3 months. • One-Day Rule: Coverage for one day in a month counts as coverage

for the whole month.

Individual Shared Responsibility Payment

Example: Michael, Brooklyn Part I

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The payment in 2014 is $95 or 1% of the income above the filing threshold. Michael will pay the greater of $95 or: $40,150 (household income) - $10,150 (individual filing threshold) = $30,000 x 1% = $300. Michael will pay $300 in additional taxes. This amount will increase each year. In 2015, Michael can expect to pay $600 and, in 2016, he can expect to pay $750. To avoid this, Michael should check out his options on NY State of Health.

Michael had no MEC in 2014. What can he expect when he finalizes his taxes? He made $40,150 in taxable income in 2014 What is Individual Shared Responsibility Payment for him?

How is the IRS going to track all of this? Let’s Meet The New Forms!

Meet the 1095-A: The Statement from the NYSOH

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• Will be sent to people who enrolled in a Bronze, Silver, Gold, or Platinum Marketplace plan

• Catastrophic plans are not eligible for the PTC and will not receive this Form

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Part I: Lists taxpayer Information NYSOH Account Number (Box2)

Part II: Lists Household Members and your coverage dates

Part III: Monthly accounting: • Column A: Value of the

essential health benefits purchased

• Column B: If you took APTCs, this column will have the SLCSP in your county

• This is a factor in PTC eligibility

• Column C: The amount of APTC paid to your carrier each month. There will be no information here if you did not use APTC

You Can Get Form 1095-A In Your NYSOH Account

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• NYSOH mails and posts the Form 1095-A online in

inboxes by January 31st.

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Second-Lowest Cost Silver Plan (SLCSP) Chart

• The chart to the left will be send to all taxpayers who enrolled in a QHP through the Marketplace and did not receive APTCs to help these taxpayers claims their PTC. o Consumers may get assistance in

selecting the correct SLCSP premium by calling the helplines or using the other resources listed at the end of this presentation.

• Additionally, some taxpayers who are below 400% FPL may not receive any PTC after they do their calculations.

• Here’s why: If the SLCSP in the taxpayer’s county costs less than the expected contribution figure associated with the taxpayer’s FPL level, then the SLCSP is considered affordable and the taxpayer does not qualify for PTC.

Example: Michael, Albany Part II

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The SLCSP costs $331.49 per month or $3,977.88. This would cost Michael 9.4% of his annual income. Michael is expected to contribute 9.5% of his income towards his health insurance cost and therefore, at $42,000, the SLCSP is affordable for Michael and he does not qualify for APTC. However, Michael will still receive a Form 1095-A and may complete Form 8962 to see if he qualifies for any PTCs at the end of 2015 due to a change in income.

Michael relocates to Albany for work. He decides to apply for health insurance through NY State of Health. He got a raise and estimates he will make $42,000 in 2015. When the application is finished, he finds his income is 360% FPL but he does not qualify for APTC. Why is this?

Form 8962: The Reconciliation Form

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• You complete this form if you received APTC or you want to claim PTC at the end of the year as a part of your taxes.

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Important Lines • Line 5: Determine the

FPL of the tax household.

• Line 24: Amount of APTCs the household is entitled to.

• Line 25: The amount of APTCs the tax household used.

• Line: 26: Over- or Under-payment due/owed.

• Line 28: Cap on the repayment of the total amount of APTCs.

Form 8962, Page 2

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• Part 4: Used if multiple tax households in one health insurance policy (domestic partners, emancipated child, divorce, etc.)

• Part 5: Alternative Calculation for Year of Marriage. Waiting on on guidance from the IRS (Publication 974).

What is an Assistor’s Role

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• APTC and PTC o At a high level, understand how to reconcile APTC

and apply for PTC • Form 1095-A

o What the form is and why it is important o Who receives the forms and where recipients can

access them o Where to send recipients for more information

• 2015 Enrollment o How to update applications for consumers who

realize they need to change their 2015 application, based on their 2014 tax return

What is NOT an Assistor’s Role

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• Assistors cannot provide tax advice in their role as a Marketplace assistor

• Examples of tax advice: o How to complete Form 8962 or Form 1040 o Who to claim as a dependent o How to report healthcare coverage on a tax return o Whether a consumer will have to pay back tax

credits or will get additional tax credits o Whether a consumer will have to make an

Individual Shared Responsibility Payment (penalty for not having coverage)

Example: Angie, Queens

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Angie recently graduated from college and started a new job as a freelance graphic designer, but isn’t sure what she will make in 2014. She wants to get health insurance in January of 2014 and estimates she will make $29,350 per year (255% of FPL). Her income of $29,350/yr (255% of FPL) means she is eligible for a APTC $169.78/mo if she wants to take it. Angie chooses a Bronze MetroPlus plan for $334.44 per month. She chooses to take her premium subsidy in advance. Final monthly cost for Angie: $334.44 - $169.78 = 164.66 At tax time, Angie discovers that her 2014 MAGI was only $25,000. Angie needs to reconcile her actual income against her estimation of $29,350. She uses Forms 1095-A and Form 8962 to recalculate her PTC and discovers that she is due $680.16 more in tax credits!

Example: Angie, Queens Part II

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Angie discovers that her 2014 MAGI income was $35,000 (305% FPL). Angie needs to reconcile her actual income against her estimation of $29,350. She uses Forms 1095-A and Form 8962 to recalculate her PTC. She has taken too much! When Angie completes Part 3 of Form 8962, she owes $916.08.

Additionally, because Angie’s repayment amount is below the Repayment Limitation cap of $1,250, Angie owes $916.08. How can Angie avoid this in the future? Some tips include: • Immediately report all changes in income to NY State of

Health to redetermine your APTC if necessary. • Only use a portion of the APTCs that Angie qualifies for as

oppose to all of it.

Changing Amount of APTC Applied

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Select the “Plans” tab from the Dashboard. On the Plan Selection Introduction page, click “Next”

Click the “Change APTC Amount” button

Click the “Confirm and Check Out” button

Change the amount of APTC applied, and click the “Confirm and Check Out” button again

Receive confirmation of the change

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• What is the difference between PTC and ATPC? – What are the benefits of one or the other? – What is Reconciliation? When it is needed and how does it

work?

• What is the Form 1095-A? – Who will receive a copy? – What should a consumer do with it?

• How can you help a client to understand why they are receiving a new tax Form? – How can you access the 1095-A? – What do you do if there are errors?

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Time to Test What You Have Learned

Who Can Help Consumers?

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CHA is available at 1-888-614-5400. • CHA can help with:

Education about the PTC, new IRS Forms Explaining to a consumer how they can access their 1095-A Helping a consumer select the correct SLCSP Explaining the repayment cap if the consumer underestimated their income

NYSOH is available at 1-855-766-7860. • NYSOH can help when:

A consumer needs a replacement 1095-A Form A consumer would like to request a corrected 1095-A

IRS is responsible for answering all questions related to tax advice. • The IRS is available at www.irs.gov.

• NY State of Health – www.info.nystateofhealth.ny.gov/taxcredits – Form 1095-A Cover Letters – SLCSP table – FAQ on Form 1095-A – Additional Consumer Materials

• Webinar hosted by NYSOH: www.info.nystateofhealth.ny.gov/taxcredits

• IRS Information: www.irs.gov/Affordable-Care-Act/Individuals-and-Families/The-Premium-Tax-Credit

• Tax Preparers

Resources

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Questions?

Contact Information

Kyle Brittingham kbrittingham@cssny.org

T: 212-614-5481 F: 212-614-5378

Mail: 105 E 22nd Street New York, NY 10010

Emily Clark

eclark@cssny.org T: 212-614-5327 F: 212-614-5534

Mail: 105 E 22nd Street New York, NY 10010

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