Helping Clients Understand Tax Filing and Health Coverage

Affordable Care Enrollment (ACE) TA Center March 9, 2016

Roadmap of todays webinar

WHAT DO TAXES TAX RECONCILIATION TAXES AND OTHER EXEMPTIONS FROM HAVE TO DO WITH FOR PEOPLE WITH HEALTH COVERAGE OR HEALTH COVERAGE

HEALTH COVERAGE? MARKETPLACE QHPS NO INSURANCE COVERAGE

LAURA TAJAN

STACEY

Introductions

www.targethiv.org/ace

What do taxes have to do with health coverage?

Reconcile Advance Premium Tax Credits

TAX YEAR

2014 2015 2016

My client received an APTC in 2015. Why didnt they receive an APTC in 2016?

Change in income or household may make client ineligible for an APTC.

Client did not file taxes in 2015 for 2014 tax year Client did not check box on application allowing

Marketplace to use information from other groups, such as the IRS.

File 2013 taxes. Receives APTC. Does not file 2014 taxes.

Does not receive APTC. File 2015 taxes.

Proof of health coverage

Client must prove they had health coverage during the last year when filing their tax return.

Documentation includes: Form 1095 information forms Insurance cards Explanation of benefits Statements from your insurer W-2 or payroll statements reflecting health insurance deductions, records of advance payments of the premium tax credit Statements indicating that you, or a member of your family,

had health care coverage. Source: https://www.irs.gov/Affordable-Care-Act/Individuals-and-Families/Gathering-Your-HealthCoverage-Documentation-for-the-Tax-Filing-Season

https://www.irs.gov/Affordable-Care-Act/Individuals-and-Families/Gathering-Your-Health

New ACE tool for clients!

targethiv.org/ace/taxes

Taxes and Health Coverage:

Health Insurance Marketplace

Taxes and Health Coverage:

Medicaid or Employer Coverage

Taxes and Health Coverage:

No Health Insurance

Assistance filing taxes

Volunteer Income Tax Assistance (VITA) program for people with incomes below $54,000 IRS -free tax filing software for people

with incomes below $62,000 Assistance through some Ryan White

Programs or their partners

Policy Clarification Notice (PCN) #16-02

Other Professional Services Services for income tax preparation to assist clients in filing Federal tax returns that are required by the Affordable Care Act for all individuals receiving premium tax credits

Taxes and health coverage?

Taxes may not be fun, but through the Affordable Care Act they now play an important role in helping make health coverage more affordable.

Individuals who receive premium tax credits must file a tax return!

Tax reconciliation for people with Marketplace QHPs

Premium Tax Credit (PTC)

A tax credit to lower the cost of insurance premiums for Marketplace coverage PTC

Cost Sharing Reductions

Given in the form of discounts Reduces deductibles, copays,

and coinsurance no CSR reimbursements necessary CSRs are not connected

to taxes

Tax filing for clients enrolled through the Marketplace

Reconciliation: How it works

Premium Tax Credits (available to people with income between 100 and 400% FPL)

PAYMENT Premium tax credit is paid in advance on a monthly basis directly to the health plan. Payment amounts are based on income, with an individual expected to pay between 2 and 9.5% of income toward premiums and the tax credit making up the difference. ADAP may cover amount not covered by federal subsidy.

RECONCILIATION When the person files a tax return for the actual year in which he/she received the tax credit, underpayments or overpayments are reconciled (overpayments are capped based on income).

APPLICATION Person applies for premium tax credit and cost-sharing reductions during marketplace open enrollment periods with either most recent tax returns or other documentation of income (e.g., pay stubs).

Cost-Sharing Reductions (available to people with income between 100 and 250% FPL)

PAYMENT Cost sharing reductions mean that plans pay a greater amount of the covered costs, taking that burden off the enrollee. The cost-sharing subsidies are paid directly to the plan. ADAP may cover amount not covered by federal subsidy.

Applicant has a choice to take the

premium tax credit in advance

or as a refund when he/she

applies

RECONCILIATION There is no consumer reconciliation process for cost-sharing reductions.

Reconciliation in action: 2015 tax year example

Why does the IRS reconcile premium tax credits?

2014 2015 2016

Consumer applies for 2015 coverage and premium tax credits based on projected 2015 income

Consumer receives advance premium tax credit based on projected annual income and any reported income changes during the year

Consumer should be reporting changes in income and/or family size to the Marketplace throughout the

year to avoid under/over-payments of advance premium tax credits!

Consumer files 2015 tax return and reconciles advance premium tax credits received with premium tax credits they are eligible for based on actual income reported on 2015 taxes

Example of where ADAPs fit into tax reconciliation Client Enrolls in a Qualified Health Plan with both APTC & ADAP Premium Support

Amount Who pays/who gets refunded

Monthly APTC (calculated at enrollment)

$175 pays the plan every month

Consumer amount left after APTC

$50 Normally the insured consumer pays the remaining premium amount, BUT ADAP steps in to shoes of consumer and pays the plan

RECONCILIATION: Was the consumer getting the right amount of APTC?

Actual APTC (calculated at tax time)

$200 Clients APTC was underpaid by $75/month. Client is going to get a refund check from the IRS for the amount the IRS should have been paying. But since ADAP was paying the consumer/client amount left after APTC, ADAP has to recoup the refund.

Actual amount consumer owed after APTC

$25

Marketplace Form 1095A and IRS Form 8962

In early February, anyone who received a premium tax credit will receive a form from the Marketplace (IRS Form 1095-A) which will include information on how much the individual received in premium tax credits for the year.

When a person files federal taxes, he/she will need to fill out IRS Form 8962 to document premium tax credits received and actual amount of premium tax credits owed based on income and household size.

Case Example:

Individual with PTC

Samuel had coverage through the Marketplace in 2015.

He received an advance premium tax credit to help cover the costs of his premium.

Case Example:

Individual with PTC

Case Example:

Individual with PTC

Case Example:

Individual with PTC

HRSA/HAB Policies on Tax

Reconciliation (PCN 14-01)

Ryan White Program grantees and sub-grantees must vigorously pursue any excess premium tax credit a client receives.

Recovered excess premium tax credit refunds are not considered program income.

HRSA/HAB ACA policies on reconciliation

PCN 14-01 and Frequently Asked Questions: RWHAP grantees paying premiums on behalf of

clients must vigorously pursue any excess premium tax credit a client receives from the IRS as a result of APTC underpayment throughout the year. RWHAP grantees can cover client tax liabilities

associated with a PTC overpayment (NEW). The payment to the IRS must be made from funds

available in the year when the tax liability is due.

HRSA/HAB ACA policies on reconciliation

PCN 14-01 and Frequently Asked Questions: Programs are responsible for establishing and

maintaining policies and procedures for coordinating payments to the IRS (direct payments to clients are prohibited). RWHAP funds may NOT be used to pay the

fee/penalty for a clients failure to enroll in minimum essential coverage.

Individuals who didnt receive a PTC should still file taxes!

If you did NOT get a premium tax credit when you enrolled in coverage: You may still be eligible for a tax credit for 2015, but

you must file your 2015 federal tax return to find out. If your income decreased during the year, you may be eligible

for a federal tax refund now (even if you were not eligible for the tax credit when you applied for coverage).

Filing your 2015 federal tax return with IRS Form 8962 is the only way youll find out if you are eligible for a premium tax credit for 2015.

Case Example:

Individual without APTC

Maria had coverage through the Marketplace in 2015.

Maria did not receive an advance premium tax credit.

Case Example:

Individual without APTC

Case Example:

Individual without APTC

Case Example:

Individual without APTC

Taxes and other health coverage or no coverage

Individuals who had other health coverage last year

Individuals who had other health coverage last year

Individuals who did not have health coverage last year

Individuals who did not have health coverage last year

Exemptions from health coverage

Exemptions from health coverage

HealthCare.gov/exemptions-tool

Exempti