Form 8885 Health Coverage Tax Credit March 1, 2012

Transcription

1 Form 8885 Health Coverage Tax Credit March 1, 2012 (Updated ; changes are highlighted in red) It is that time of the year again time to file your federal income tax return. For those of you who were eligible for the Health Coverage Tax Credit (HCTC) during 2011, the following information may prove useful as you complete your tax return for tax year However, it is not written or intended as tax or legal advice. Each members financial and tax situation is unique and members are responsible for their own interpretation and use of this information. The DSRA-BT Board of Directors cannot address personal tax matters. If you made payments to the HCTC Program during 2011, you should have recently received a Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. You will need this information to complete the Form 8885, Health Coverage Tax Credit, which should be filed with Form 1040, U.S. Individual Income Tax Return for tax year The following is general information and is provided for all HCTC participants. For January and February 2011, the credit was 80% for amounts paid for qualified health insurance premiums. As a result, you have received the maximum credit allowed for these two payments. For March December 2011 payments, the tax credit decreased to 72.5%. You will notice that your December 2011 payment amount may be different than the prior months (January- November) due to the premium reductions that were made for the 2012 plan year. However, your payment may still be claimed on Form 8885 for tax year If you were a QFM in 2011, the IRS recommends that you claim the December payment for January 2012 coverage on your 2012 federal income tax return. If you have already submitted your 2011 federal income tax return and included your December payment for January 2012 coverage, your request may be accepted by the IRS. If not, then you should file either the request for credit (Form 14095) or re-file next year with your 2012 federal income tax return. If you received a Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments, read the instructions on both sides of the form. They provide very clear guidelines for your specific situation. Where the IRS refers to amount paid directly to your health plan you can substitute payments to Marsh The IRS and the HCTC Program staff recommend that one Form 8885 be submitted by couples filing a joint return. The Recipient name at the top of the form should be the PBGC recipient s name (the same as listed on Form 1099-H), even if the credit requested is specific to the non-retiree spouse. There are many different situations our HCTC-eligible participants and their families found themselves in during While the DSRA-BT Board cannot produce specific instructions and examples for every situation our members may have experienced in 2011, we have provided information we believe applies to the majority of our members. However, if you do not participate in the monthly HCTC Program and intentionally planned on using your tax return to receive the HCTC credit, this update is not intended for your situation. THE INFORMATION PROVIDED IS NOT WRITTEN OR INTENDED AS TAX OR LEGAL ADVICE AND MAY NOT BE RELIED ON FOR PURPOSES OF AVOIDING FEDERAL TAX PENALTIES. DSRA BENEFIT TRUST AS WELL AS FIRST PERSON, INC., ITS EMPLOYEES, AND REPRESENTATIVES ARE NOT AUTHORIZED TO GIVE TAX OR LEGAL ADVICE. INDIVIDUALS ARE ENCOURAGED TO SEEK ADVICE FROM THEIR OWN TAX OR LEGAL COUNSEL.

2 Page 2 We have outlined below two situations that impact the majority of our participants. Specifically: SITUATION A You were an HCTC participant who received the 65% HCTC credit for payments made during the months of March-December 2011, but are eligible for a total credit of 72.5% due to the reauthorization of the Trade Adjustment Act (TAA). If this situation applies to you, you and your spouse were both under 65 and were enrolled in a BCBSM medical plan in As such, you are only eligible for an additional 7.5% retroactive credit for payments made March-December Because 100% of your payments were paid to the HCTC Program during the 2011 calendar year, the IRS has calculated your retroactive 7.5% credit due and included it on the 1099-H (as shown to the left of box 8). This is the amount you should enter on Line 7 on Form Lines 1-6 do not apply to your situation. The instructions included with your 1099-H clearly state that in this particular situation, supporting documentation for premiums and proof of payment is not required. Please review the instructions to determine the impact on your situation. SITUATION B You were a Qualified Family Member (QFM) who lost the HCTC monthly credit in its entirety during 2011, but are eligible for a total credit due to the reauthorization of the TAA which reestablished the HCTC entitlement to QFMs. If this situation applies to you, you are eligible for a 72.5% credit for payments made March-December The IRS requires documentation of the health plan premium amount and proof of payments made to Marsh. Refer to page 4 of the Form 8885 instructions. If you need assistance providing this paperwork, please contact Marsh at DSRA (3772). Please allow Marsh up to three weeks to complete your request. BCBSM BRONZE plan participants that took advantage of the $70 subsidy reduction opportunity for the purpose of meeting the HCTC >50% premium paid eligibility requirement, are required to provide the DSRA-BT issued receipt along with the other supporting documentation. The following health plan identification information is required by the IRS and may not be included with your invoice or Marsh provided receipt. Please record the appropriate plan identification name and number for participants between the ages of on your documentation. Name of Health Insurance Plan Health Plan ID # Policy ID # DSRA-BT VEBA Gold Health Plan DSRA DSRA-BT VEBA Silver Health Plan DSRA DSRA-BT VEBA Bronze Health Plan DSRA We have outlined three examples that focus specifically on QFM situations (see attached), including: Example. Retiree goes on Medicare during 2011 and spouse (QFM) remains enrolled in the BCBSM GOLD medical plan Example. Retiree and spouse (both age 55-64) start year enrolled in BCBSM GOLD medical plan; Retiree then goes on Medicare in October 2011 and spouse (QFM) changes to the BCBSM BRONZE medical plan and returns to the DSRA-BT $70/month to qualify for the HCTC Example. Retiree is 65 or older. Spouse (QFM) who is age 55-64, was HCTC eligible and enrolled in BCBSM GOLD medical plan January-March but changed to the BCBSM BRONZE medical plan when the HCTC expired; Spouse is again eligible for HCTC QFM with new extension of HCTC law; Spouse paid back $70/month of the DSRA-BT subsidy to qualify for the HCTC Each example starts with a short summary of the steps required to fill out Form A simple worksheet is included showing what payments were made to Marsh during the year (if any) and how these totals are entered into Form A mock-up of a 1099-H is also included. If your situation is similar but your medical plans are different than the plans outlined here, please substitute your plan premium information. THE INFORMATION PROVIDED IS NOT WRITTEN OR INTENDED AS TAX OR LEGAL ADVICE AND MAY NOT BE RELIED ON FOR PURPOSES OF AVOIDING FEDERAL TAX PENALTIES. DSRA BENEFIT TRUST AS WELL AS FIRST PERSON, INC., ITS EMPLOYEES, AND REPRESENTATIVES ARE NOT AUTHORIZED TO GIVE TAX OR LEGAL ADVICE. INDIVIDUALS ARE ENCOURAGED TO SEEK ADVICE FROM THEIR OWN TAX OR LEGAL COUNSEL.

3 Page 3 Many of you may have received a bulletin from the HCTC late last fall (November timeframe). The following message was included in that letter and is provided here to reinforce the HCTC s advice to certain HCTC eligible families: Please note that PBGC payees who were 65 years of age on or before January 31, 2011 and were not enrolled in the monthly HCTC program in January or February 2011 must call the HCTC Contact Center before filing their Form 8885 to ensure that it is processed correctly. The HCTC contact center phone number is QUESTIONS If you have questions regarding this process, please contact a member of the DSRA-BT Board of Directors. For a list of Board members, please go to our website and click on Benefit Trust Committee on the top banner. If you have questions about the benefit plans, please contact Marsh, our plan administrator, at DSRA (3772) DSRA Benefit Trust Board of Directors THE INFORMATION PROVIDED IS NOT WRITTEN OR INTENDED AS TAX OR LEGAL ADVICE AND MAY NOT BE RELIED ON FOR PURPOSES OF AVOIDING FEDERAL TAX PENALTIES. DSRA BENEFIT TRUST AS WELL AS FIRST PERSON, INC., ITS EMPLOYEES, AND REPRESENTATIVES ARE NOT AUTHORIZED TO GIVE TAX OR LEGAL ADVICE. INDIVIDUALS ARE ENCOURAGED TO SEEK ADVICE FROM THEIR OWN TAX OR LEGAL COUNSEL.

4 THE INFORMATION PROVIDED IS NOT WRITTEN OR INTENDED AS TAX OR LEGAL ADVICE AND MAY NOT BE RELIED ON FOR PURPOSES OF AVOIDING FEDERAL TAX PENALTIES. DSRA BENEFIT TRUST AS WELL AS FIRST PERSON, INC., ITS EMPLOYEES, AND REPRESENTATIVES ARE NOT AUTHORIZED TO GIVE TAX OR LEGAL ADVICE. INDIVIDUALS ARE ENCOURAGED TO SEEK ADVICE FROM THEIR OWN TAX OR LEGAL COUNSEL. Example Example --- Retiree goes on Medicare during 2011 and spouse (QFM) remains enrolled in the BCBSM GOLD medical plan The spreadsheet below shows the steps you need to take to fill out Form 8885 to calculate your HCTC refund, including: Determine how much you paid directly to Marsh during the year. Calculate the total payments. Enter this total on Line 2, Column B on Form Calculate your HCTC refund by multiplying the Total Payments by Enter this total on Line 6 on Form 8885 (this is your HCTC for the money you paid to Marsh). Determine the additional 7.5% addition HCTC refund, which can be found on Form 1099-H in the box to the left of Box 8. This is the additional 7.5% of HCTC that the IRS has calculated you are due for the months of March-December 2011 for the payments you made directly to the HCTC. Add the 72.5% HCTC Refund on Line 6 to the Addtl' 7.25% HCTC Refund from Form 1099-H. This is the total HCTC you will then enter on Line 7 of Form 8885.

5 Example --- Retiree goes on Medicare during 2011 and spouse (QFM) remains enrolled in the BCBSM GOLD medical plan Month Payment Made Amount Sent to Marsh Explanation Notes: Jan N/A N/A in this example Feb N/A N/A in this example Mar Apr May Jun Jul Aug Sep $ Retiree went on Medicare starting in October, so QFM medical insurance payment made to Marsh for the Gold Plan Oct $ QFM medical insurance payment made to Marsh for Gold Plan Nov $ QFM medical insurance payment made to Marsh for Gold Plan Dec $ QFM medical insurance payment made to Marsh for Gold Plan for the Jan 2012 premium Total Payments $2, Calculate the total payments. Enter this total on Line 2, Column B on Form % HCTC Refund Calculate your HCTC refund by multiplying the Total Payments by Enter this total on Line 6 on Form $1, (this is your HCTC for the money you paid to Marsh). Determine the additional 7.5% addition HCTC refund, which can be found on Form 1099-H in the box to the Addtl' 7.5% $ left of Box 8. This is the additional 7.5% of HCTC that the IRS has calculated you are due for the months of HCTC Refund March-December 2011 for the payments you made directly to the HCTC. Add the 72.5% HCTC Refund on Line 6 to the Addtl' 7.25% HCTC Refund from Form 1099-H. This is the TOTAL $2, total HCTC you will then enter on Line 7 of Form 8885.

6 THE INFORMATION PROVIDED IS NOT WRITTEN OR INTENDED AS TAX OR LEGAL ADVICE AND MAY NOT BE RELIED ON FOR PURPOSES OF AVOIDING FEDERAL TAX PENALTIES. DSRA BENEFIT TRUST AS WELL AS FIRST PERSON, INC., ITS EMPLOYEES, AND REPRESENTATIVES ARE NOT AUTHORIZED TO GIVE TAX OR LEGAL ADVICE. INDIVIDUALS ARE ENCOURAGED TO SEEK ADVICE FROM THEIR OWN TAX OR LEGAL COUNSEL. Example Example --- Retiree and spouse (both age 55-64) start year enrolled in BCBSM GOLD medical plan; Retiree then goes on Medicare in October 2011 and spouse (QFM) changes to the BCBSM BRONZE medical plan and returns to the DSRA-BT $70/month to qualify for the HCTC The spreadsheet below shows the steps you need to take to fill out Form 8885 to calculate your HCTC refund, including: Determine how much you paid directly to Marsh during the year. If you were enrolled in the BCBSM BRONZE plan, you had to return $70/month of the DSRA-BT subsidy to be eligible for the HCTC. Add this $70 to the amount paid to Marsh each month to get the Net Amount Sent to Marsh for your insurance premium. Calculate the total payments. Enter this total on Line 2, Column B on Form Calculate your HCTC refund by multiplying the Total Payments by Enter this total on Line 6 on Form 8885 (this is your HCTC for the money you paid to Marsh). Determine the additional 7.5% addition HCTC refund, which can be found on Form 1099-H in the box to the left of Box 8. This is the additional 7.5% of HCTC that the IRS has calculated you are due for the months of March-December 2011 for the payments you made directly to the HCTC. Add the 72.5% HCTC Refund on Line 6 to the Addtl' 7.25% HCTC Refund from Form 1099-H. This is the total HCTC you will then enter on Line 7 of Form 8885.

7 Example --- Retiree and spouse (both age 55-64) start year enrolled in BCBSM GOLD medical plan; Retiree then goes on Medicare in October 2011 and spouse (QFM) changes to the BCBSM BRONZE medical plan and returns to the DSRA-BT $70/month to qualify for the HCTC Subsidy Amount Net Payment Month Payment Amount Sent Returned to Amount Sent to Made to Marsh DSRA-BT Marsh Explanation Notes: Jan N/A N/A N/A N/A in this example Feb N/A N/A N/A N/A in this example Mar $0.00 $0.00 Apr $0.00 $0.00 May $0.00 $0.00 Jun $0.00 $0.00 Jul $0.00 $0.00 Aug $0.00 $0.00 Sep $ $70.00 $ Retiree went on Medicare starting in October, so QFM medical insurance payment made to Marsh for the Bronze Plan Oct $ $70.00 $ QFM medical insurance payment made to Marsh for Bronze Plan Nov $ $70.00 $ QFM medical insurance payment made to Marsh for Bronze Plan Dec $ $0.00 $ QFM medical insurance payment made to Marsh for Bronze Plan for the Jan 2012 premium Total Payments $1, Calculate the total payments. Enter this total on Line 2, Column B on Form Calculate your HCTC refund by multiplying the Total Payments by Enter this total on Line 6 on Form % HCTC Refund $ (this is your HCTC for the money you paid to Marsh). Determine the additional 7.5% addition HCTC refund, which can be found on Form 1099-H in the box to the left of Addtl' 7.5% HCTC Refund $ Box 8. This is the additional 7.5% of HCTC that the IRS has calculated you are due for the months of March- December 2011 for the payments you made directly to the HCTC. Add the 72.5% HCTC Refund on Line 6 to the Addtl' 7.25% HCTC Refund from Form 1099-H. This is the total TOTAL $1, HCTC you will then enter on Line 7 of Form 8885.

8 THE INFORMATION PROVIDED IS NOT WRITTEN OR INTENDED AS TAX OR LEGAL ADVICE AND MAY NOT BE RELIED ON FOR PURPOSES OF AVOIDING FEDERAL TAX PENALTIES. DSRA BENEFIT TRUST AS WELL AS FIRST PERSON, INC., ITS EMPLOYEES, AND REPRESENTATIVES ARE NOT AUTHORIZED TO GIVE TAX OR LEGAL ADVICE. INDIVIDUALS ARE ENCOURAGED TO SEEK ADVICE FROM THEIR OWN TAX OR LEGAL COUNSEL. Example Example --- Retiree is 65 or older; Spouse (QFM) who is age 55-64, was HCTC eligible and enrolled in BCBSM GOLD medical plan January-March but changed to the BCBSM BRONZE medical plan when the HCTC expired; Spouse is again eligible for HCTC QFM with new extension of HCTC law; Spouse paid back $70/month of the DSRA-BT subsidy to qualify for the HCTC The spreadsheet below shows the steps you need to take to fill out Form 8885 to calculate your HCTC refund, including: Determine how much you paid directly to Marsh during the year. If you were enrolled in the BCBSM BRONZE plan, you had to return $70/month of the DSRA-BT subsidy to be eligible for the HCTC. Add this $70 to the amount paid to Marsh each month to get the Net Amount Sent to Marsh for your insurance premium. Calculate the total payments. Enter this total on Line 2, Column B on Form Calculate your HCTC refund by multiplying the Total Payments by Enter this total on Line 6 on Form 8885 (this is your HCTC for the money you paid to Marsh). Determine the additional 7.5% addition HCTC refund, which can be found on Form 1099-H in the box to the left of Box 8. This is the additional 7.5% of HCTC that the IRS has calculated you are due for the months of March-December 2011 for the payments you made directly to the HCTC. Add the 72.5% HCTC Refund on Line 6 to the Addtl' 7.25% HCTC Refund from Form 1099-H. This is the total HCTC you will then enter on Line 7 of Form 8885.

9 Example --- Retiree is 65 or older. Spouse (QFM) who is age 55-64, was HCTC eligible and enrolled in BCBSM GOLD medical plan January-March but changed to the BCBSM BRONZE medical plan when the HCTC expired; Spouse is again eligible for HCTC QFM with new extension of HCTC law; Spouse paid back $70/month of the DSRA-BT subsidy to qualify for the HCTC Subsidy Amount Net Payment Month Payment Amount Sent Returned to Amount Sent to Made to Marsh DSRA-BT Marsh Explanation Notes: Jan N/A N/A N/A N/A in this example Feb N/A N/A N/A N/A in this example Mar $ $70.00 $ QFM medical payment was made to Marsh for Bronze plan Apr $ $70.00 $ QFM medical payment was made to Marsh for Bronze plan May $ $70.00 $ QFM medical payment was made to Marsh for Bronze plan Jun $ $70.00 $ QFM medical payment was made to Marsh for Bronze plan Jul $ $70.00 $ QFM medical payment was made to Marsh for Bronze plan Aug $ $70.00 $ QFM medical payment was made to Marsh for Bronze plan Sep $ $70.00 $ QFM medical payment was made to Marsh for Bronze plan Oct $ $70.00 $ QFM medical payment was made to Marsh for Bronze plan Nov $ $70.00 $ QFM medical payment was made to Marsh for Bronze plan Dec $ $0.00 $ QFM medical insurance payment made to Marsh for Bronze Plan for the Jan 2012 premium Total Payments $2, Calculate the total payments. Enter this total on Line 2, Column B on Form Calculate your HCTC refund by multiplying the Total Payments by Enter this total on Line 6 on Form 72.5% HCTC Refund $1, (this is your HCTC for the money you paid to Marsh). Determine the additional 7.5% addition HCTC refund, which can be found on Form 1099-H in the box to the Addtl' 7.5% HCTC Refund $0.00 left of Box 8. This is the additional 7.5% of HCTC that the IRS has calculated you are due for the months of March-December 2011 for the payments you made directly to the HCTC. Add the 72.5% HCTC Refund on Line 6 to the Addtl' 7.25% HCTC Refund from Form 1099-H. This is the total TOTAL $1, HCTC you will then enter on Line 7 of Form 8885.