Affordable Care Act. Pub 4012 ACA Tab Pub 4491 Lesson 3

Transcription

1 Affordable Care Act Pub 4012 ACA Tab Pub 4491 Lesson 3

2 ACA IT s The Law Like it or not Repeal or change possible But, Applies to 2016 Deal with it The Good News Most of clients have Medicare 2

3 ACA Summary Taxpayers are responsible for MEC for themselves and their dependents The preparer can help determine if the taxpayer can claim an exemption, if needed If taxpayer doesn t have MEC and doesn t have an exemption, they owe a SRP 3

4 ACA Summary If taxpayer buys their coverage in the Marketplace, they may be eligible for PTC and may get APTC to help pay the premiums The Mkt will determine their eligibility for PTC The preparer can help the taxpayer determine whether they remained eligible and compute the final PTC amount 4

5 Three Main Elements Everyone must have Healthcare Insurance Exemptions are available (Form 8965) No Insurance and No Exemption? Additional tax - Individual Shared Responsibility Payment ( SRP ) Financial Assistance (APTC PTC) Credit may be available (Form 8962) 5

6 MARKET PLACE For California Market Place is Covered California 6

7 Intake & Interview Complete the ACA section of the I&I form as much as possible Finish when return is finalized If need an exemption, make initial determination on which exemption(s) Decide whether the return should be prepared by a more experienced counselor 7

8 Intake & Interview If MEC was purchased through COVERED CALIFORNIA, must have Form 1095-A Should be received by ~ 1/31/17 Screen for out-of-scope issues Shared policy or Alternative calculation for year of marriage 8

9 Intake & Interview Make notes of information received from the taxpayer on the Intake form Finish the notes when the return is completed 9

10 Intake & Interview C Preparer and Reviewer notations sample: 10

11 Coverage End Result: Form 1040 Coverage or SRP line 61 Never coverage and SRP Not just any coverage must be minimum essential coverage (MEC) 11

12 REFERENCES 4012 ACA TAB IRS Instructions for 8685 and (on the CD) Lesson 3 12

13 What is Minimum Essential Coverage (MEC)? Pub 4012 ACA-4 More than limited coverage, generally Pub 4012 p. ACA-4 Pub 4491 p. 3-2 definition 95% of all Tax-Aide taxpayers had MEC for 2015 Can rely on taxpayer s good faith representation no need for proof 13

14 Types of MEC Employer-sponsored insurance ( ESI ) Includes: Private and governmental employers, but not military Can be insured or self-insured 14

15 Types of MEC Government-sponsored insurance ( GSI ) Includes: Medicare Part A or Advantage Most Medicaid, CHIP, TRICARE (military) Comprehensive VA Peace Corps, etc. (see Form 8965 instructions) 15

16 Types of MEC Individual market insurance Private or personal policy If purchased through COVERED CALIFORNIA, it is a Marketplace policy 16

17 Does Taxpayer Have MEC? Rely on interview and on taxpayer s good faith representation May be exhibited by (but don t need to see) Insurance card Form 1095-B Health Coverage Form 1095-C Employer-provided Insurance Offer and Coverage Other tax forms 17

18 Other Tax Forms That Show MEC Cost of employersponsored coverage Medicare premiums deducted from benefits 18

19 Who is Responsible for Coverage? Every Taxpayer! For self, spouse and dependents Collectively, the Tax Family The definition is in Form 8965 instructions (and Pub 4491 p. 3-21) 19

20 Who is Responsible for Coverage? 5. Stevie is 20 years old, in school and claimed as a dependent by his parents He also has a part-time job and will file a return Who is responsible for Stevie s coverage? Answer: Stevie s parents are responsible for Stevie s MEC because they can claim him as a dependent 20

21 Who is Responsible for Coverage? 5. (cont.) What if Stevie s parents do not claim him as their dependent, even though they could? Answer: Stevie s parents are not liable for SRP if Stevie does not have coverage And, Stevie does not claim his own exemption so he is not responsible for his own MEC 21

22 When is Coverage Needed? Count full months lived for births or deaths* Count full months following month of adoption* * See exemption code H later when someone on the return does not have coverage for the full year 22

23 When Everyone Has MEC All Year (not Mkt policy) A few quick clicks in TaxSlayer Health Insurance section Any coverage? From Mkt? 23

24 When Everyone Has MEC All Year (not Mkt policy) Verify just click continue All months? 24

25 When Everyone Has MEC All Year Confirm result on Summary / Print page 2 Box will be checked on Line 61 done! 25

26 Now It Gets a Little Complicated Use the references (ACA tab) When any individual on the return lacks MEC for any full month Which months? Is there an (easy) exemption? If not, should a more experienced counselor prepare the return? 26

27 Now It Gets a Little Complicated When any individual on the return lacks MEC for any full month Need answers before completing TaxSlayer questions Step 1: look for an exemption that applies 27

28 Exemption Form 8965 Part I for Marketplace exemptions Part II for filing threshold exemption Part III for individual exemptions claimed on return 28

29 Who needs an exemption? Pub 4012 ACA-5 Any individual on the tax return who did not have MEC for one or more months during the tax year 29

30 Types of Exemptions Pub 4012 ACA-7 Exemptions that can be claimed on the tax return Exemptions that can be requested from the Marketplace Some are prospective; some can be retrospective 30

31 Types of Exemptions Some exemptions cover everyone on the return; some cover the particular individual only Some exemptions are good for the whole year; some cover specific months Exempt for one day means exempt for the whole month! 31

32 Pub 4012 ACA-7 How to start: Does the taxpayer already have an exemption from the Marketplace or have an application pending? NO Does the taxpayer have income below the filing threshold? Applies to the entire household for the entire year. NO Exemptions for individuals (duration varies): Short coverage gap Code B Resided in Medicaid non-expansion state Certain noncitizens and citizens living abroad Health care sharing ministry Federally-recognized Indian tribe or eligible for IHS Incarceration Member of household born, adopted or died Insurance is unaffordable Aggregate cost of insurance is unaffordable Code G Code C Code D Code E Code F Code H Code A Code G NO Does anyone qualify for a Marketplace hardship exemption? 32

33 Is there a Marketplace Exemption? First, ask if taxpayer already has an exemption from the marketplace Marketplace Exemptions may exempt one or more individuals for some or all months of the year Taxpayer provides their marketplace exemption certificate number ( ECN ) letter If not yet received, use PENDING Less than ½ of 1% had a Mkt exemption in 2015 across all VITA/TCE 33

34 Is there an Exemption? Second, start with exemptions that can be claimed on tax return Simpler than applying for Marketplace exemptions But note that some Marketplace exemptions can be granted retroactively 34

35 Filing Threshold Exemption Two filing threshold exemptions One for household income The other for taxpayer s gross income Just one question on the form Pub 4012 ACA-8 Does the taxpayer have income below the filing threshold? Applies to the entire household for the entire year. 35

36 Filing Threshold Exemption Household Income Household income below filing threshold, where household income = MAGI = Adjusted Gross Income (AGI) + Tax-Exempt Interest + Excluded Foreign Income Form 1040, Line 37 Form 1040, Line 37 Form 1040, Line 8b Form 2555 or 2555-EZ Include MAGI of claimed dependents required to file a return due to gross income 36

37 Use References For details see ACA tab in

38 Filing Threshold Exemption When a filing threshold exemption applies: EVERYONE on the return is exempted for the WHOLE year Can stop here; otherwise, continue to other exemptions 38

39 Individual Exemptions Claimed on Form 8965 Part III Pub 4012 ACA-7 No need to memorize each exemption or type code Refer to Pub 4012 p. ACA-7 39

40 Short-Gap Exemption Code B Gap must be less than 3 consecutive months Exemption does not apply if gap is 3 months or more Look back (to 2015) but no need to look forward (to 2017) If a month is covered by another exemption, it is treated as having coverage and that month is not a gap month 40

41 Short-Gap Exemption Can use short-gap exemption only once per individual per year If two short gaps, short-gap exemption applies to earlier gap Can use another exemption for another gap or for adjacent months 41

42 Noncitizens or Citizen Living Abroad Exemption Code C Not a U.S. citizen, not a U.S. national, and not lawfully present in the U.S. Includes DACA immigrants Most often seen scenario for this exemption code 42

43 Incarceration Exemption Code F Includes being in a jail, prison, or similar penal institution or correctional facility after the disposition of charges Does not include Time in jail pending disposition of charges (being held but not convicted of a crime) Time in probation, parole, or home confinement One day of incarceration satisfies the test for the full month 43

44 Affordability Exemptions Two affordability exemption categories: There is an offer of employer coverage There is no offer of employer coverage Both test the applicable cost against the affordability threshold If coverage is unaffordable, the exemption applies 44

45 AFFORDABILITY EXEMPTIONS Calculate MAGI Household income Insurance cost can t be more than 8.13% of income GET HELP 45

46 Indicate Months of Coverage For each Person on the return, indicate the months they have coverage 46

47 Indicate Months of Coverage For each Person on the return, indicate the months they have coverage 47

48 Indicate Months of Coverage Two prior screens must match or get error message We said Second Taxpayer had 8 months of coverage, not 12 48

49 Exemptions in TaxSlayer Need to have answers first, then enter in TaxSlayer Note the or answer yes if there is ANY exemption 49

50 Claiming an Exemption If not a Mkt nor filing threshold exemption, which one? 50

51 Claiming an Exemption (Form 8965 Part III) For each Person on the return, indicate exemption being claimed Also check full year or months for which exemption is claimed Can have more than one exemption per Person 51

52 Claiming an Exemption (Form 8965 Part III) Add more until all exemptions needed are listed 52

53 Claiming an Exemption Reminder need to know which exemption(s) to claim for which month(s) for which Person before making entries Use the Intake form! 53

54 Claiming an Exemption If all months accounted for with coverage or exemption, no SRP If not, TaxSlayer computes SRP TaxSlayer exits Health Insurance section 54

55 ACA Exemptions Click Summary/ Print Is there a Shared Responsibility Payment? Should there be one? 55

56 No Insurance, No Exemption? Individual Shared Responsibility Payment (ISRP or SRP) is paid with tax return 2014 small penalty 2015 bigger penalty 2016 even bigger penalty $695. or 2.5% income Adjusted thereafter SRP is core, but when SRP applies the Reviewer must have comprehensive training to assure that no exemption applies 56

57 Shared Responsibility Payment (SRP) Pub 4012 ACA-13 Year Full-year payment is greater of: % of household income above tax filing threshold (up to cap*) 2% of household income above tax filing threshold (up to cap*) 2.5% of household income above tax filing threshold (up to cap*) $95 per adult, $47.50 per child (up to cap of $285) $325 per adult, $ per child (up to cap of $975) $695 per adult, $ per child (up to cap of $2,085) > 2016 Values increased by a cost-of-living adjustment * Capped at national average premium of a bronze level plan purchased through a Marketplace. For 2016, the cap is $2,676 per individual ($223 per month per individual), with a maximum of $13,380 for a family with five or more members ($1,115 per month for a family with five or more members). 57

58 Example: John (Single) Income: $17,000 Filing Status: Single Adults: 1 Children: 0 Tax Filing Threshold: $10,350 Months Uninsured: 12 58

59 Example: John (Single) Penalty Calculation: 1. $17,000 - $10,350 = 2. $695 x 1 adult = $6,650 x 2.5% $ 166 $695 SRP for

60 Premium Tax Credit Premium Tax Credit ( PTC ) a refundable credit Marketplace estimates PTC at time of purchase PTC can be paid in advance ( APTC ) to insurance company OR applied as refundable credit on federal tax return Must be reconciled on tax return Must file to reconcile APTC even if not otherwise required to file Use Form 8962 using Form 1095-A information 60

61 PTC Eligibility For each month: Must have qualified health plan through Marketplace as of the first day of each month TP s share of premiums paid by due date of return Not eligible for other MEC includes an offer, even if it was not taken Affordable employer coverage Government-sponsored coverage Other HHS certified MEC Exceptions apply 61

62 PTC Eligibility For the year: Household income within 100% to <401% of FPL Cannot be claimed as a dependent Cannot file MFS Exceptions apply 62

63 PTC End Result: Form 1040 Repay excess credit line 46 or claim more credit line 69 63

64 Calculation of PTC Pub 4012 ACA-14 Final amount of PTC is computed on Form 8962 Need Form 1095-A Monthly premium amount SLCSP (second lowest cost silver plan) APTC Need household income TaxSlayer then computes the credit 64

65 PTC in TaxSlayer Copy data from 1095-A into TaxSlayer input form Annual totals if all months are the same Monthly amounts if not Hint: Ctrl-C on field to copy contents and use Ctrl-V to past down each month 65

66 Final PTC Based on final tax return data Final PTC may be more than the Advance PTC ( APTC ) Claim a credit on the 1040 Final PTC may be less than the APTC Pay back the excess (may be capped) 66

67 Repayment of Excess APTC Pub 4012 ACA-18 Cap on repayment is based on Household MAGI* as a % of FPL Full repayment if 400% FPL No rounding of percentages! *PTC definition 67

68 ACA Scope Limitations Pub 4012 ACA-19 Form 8962, Part IV: Shared policies A Marketplace policy that covers individuals that are not on the same tax return Form 8962, Part V: Alternative Calculation for Year of Marriage 68

69 ACA Scope Limitations Self-employed individual s health insurance adjustment to gross income remains out of scope (greatly complicated if PTC is involved) 69

70 Affordable Care Act Comments Questions 70