9/12/2013. Affordable Care Act. Legal Services in Ohio Low Income Taxpayer Clinics Other Legal Services How to Contact

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1 Tax Implications of the Affordable Care Act Ohio Benefit Bank Annual Conference Agenda Affordable Care Act Timeline for tax preparers Basic Provisions Premium Tax Credits Penalties Legal Services in Ohio Low Income Taxpayer Clinics Other Legal Services How to Contact The YouToons Get Ready For Obamacare, The Henry J. Kaiser Family Foundation, accessed 9/5/2013, The YouToons Get Ready For Obamacare 1

2 2013 Filing Season will not be affected by this law. Individuals do not need to file their 2012 or 2013 return to access benefits BUT it could make it easier. In order to keep subsidies, individuals will have to file their 2014 returns and beyond. REMEMBER October 1, March 31, 2014 Open enrollment Advanced Premium Tax Credit through Marketplace / Exchange January 1, 2014 Coverage through Marketplace Begins Tax Season 2015 Reconciliation of advanced credits on 2014 tax return Important Dates Basic Provisions Almost everyone will be required to have health insurance. For those not eligible for insurance through their workplace or Medicaid, subsidies will be available to make health insurance more affordable. 2

3 Premium Tax Credits Credits that make health insurance affordable for taxpayers whose household income is between 100 and 400 % of the Federal Poverty Level. Available in advance through the Marketplace or as a refundable credit on the tax return. As enacted, the Affordable Care Act mandated that states expand Medicaid to cover all citizens with income of 138% of the Federal Poverty Line or below. The US Supreme Court invalidated that provision and gave states the option to expand. OH has not yet chosen to expand Medicaid. Medicaid for aged, blind and disabled continues unchanged but adults who do not fit those categories remain uninsured. Medicaid Expansion Filing status NOT married filing separately No affordable insurance offered through employer & not eligible for Medicaid Meets citizenship / lawful residence requirement* Above 100% of poverty line but below 400% *Lawfully residing immigrants below 100% FPL who are ineligible for Medicaid due to immigration status are eligible for credits Premium Tax Credits 3

4 Eligibility for Tax Credits - Income Income between 100 and 400% of Federal Poverty Level based on household size. Household size is the taxpayer and those for whom he or she plans to claim an exemption on the tax return reporting the credit. Persons in family/household Poverty guideline For families/households with more than 8 persons, add $4,020 for each additional person. 1 $11, , , , , , , ,630 Federal Poverty Line 2013 (100%) Premium Tax Credit Household 1. Jack and Marcy are married with two children. They will file a joint return for tax year Their household size is Same as above but Jack and Marcy are unmarried with two children. Since they are the parents of both children and lived together all year, Jack and Marcy can decide who can claim the exemptions. 3. Same as above but Jack and Marcy get divorced. The children live with Marcy for the last half of the year. The divorce decree gives exemptions to Jack. Jack can claim the children as exemptions on his return but cannot claim the credit. Marcy s household size is 1. 4

5 Premium Tax Credit Household 1. Joe and Margie are not married and have one child. They are no longer living together and the children live with Joe all year during Margie s household size is 1 and Joe s household size is Same as above but there is a custody order that allows Margie to claim their child as a dependent in even years. In 2014, Margie has a household size of 2. In 2015, Margie s household size is 1 and Joe s household size is 2. Premium Tax Credit Household Size Determines eligibility for credit Determines amount of credit Determines amount of shared responsibility payment Accessing Credits For most taxpayers, it makes the most sense to access the credits in advance. Taxpayers will apply for Advanced Premium Tax Credit through the online marketplace at h (Paper and in person applications may also be possible) Credits will be paid by the federal government directly to the insurance company. Taxpayers will also pay their share of the insurance costs directly to the insurance company. 5

6 Accessing Credits When taxpayers apply to the marketplace, they will be able to choose their health insurance plan. Plans are divided into 4 tiers: Bronze, Silver, Gold and Platinum. The Premium Tax Credit is tied to the Silver tier plan, the benchmark plan. Amount of credits The credit amount is generally equal to the difference between the premium for the benchmark plan and the taxpayer s expected contribution. Expected Contribution Income Level Up to 133% FPL Premium as a Percent of Income 2% of income % FPL 3 4% of income % FPL 4 63%of 6.3% income % FPL % of income % FPL % of income % FPL 9.5% of income 6

7 Examples Person Projected 2014 Income Jack $36,123 Marcy $19,222 Joe $9,412 Margie $33,120 Examples Jack and Marcy 1. AGI - $55,345 is 235% FPL; Premium for Silver Plan is $ 9,869. Their expected contribution is 7.53% of income or $ 4,165 per year ($347/ month). The tax credit paid to the insurance company is $5, If John claims all the children, his expected contribution ti is $2,026 / year and the tax credit will be $ 4,825. Marcy s expected contribution would be $922/ year and her tax credit would be $2,096. If each claim one child, John s expected contribution will be $ 2,692 and Marcy s would be $384.(CHIP rules may change this result.) 3. Jack does not get the credit and would be responsible for health insurance for the children under the Act. Marcy would qualify for her own tax credit and the children MAY be eligible for CHIP. Examples Joe and Margie 1. Joe s AGI of $ 9,412 is 61% FPL; Child qualifies for CHIP but Joe does not qualify for a tax credit. Margie does not qualify for a tax credit. 2. In 2014, Margie s household size is 2 but she buys health insurance only for herself. She pays a premium of $2,244 and the credit is $775. In 2015, Margie s household size is 1 and she premium is $3,018 because she does not qualify for a credit. 7

8 What happens if. If a taxpayer gets too much advanced premium tax credit They must pay it back. The amount of the credit they received through the marketplace will be reconciled with the correct credit on the 2014 tax return. If they got too much, they must pay back a portion based on their income. If they got too little, they will get a refund. Taxpayers should report changes in income and household composition as they occur to minimize repayment burdens. Caps on Repayment Table 2 Cap on the Amount of Advance Credits That Individuals and Families Must Pay Back Income as Annual income percentage of for an individual poverty line (2013 $) Single taxpayers Annual income for a family of four (2013 $) Married taxpayers filing jointly Under 200% Under $22,980 $300 Under $47,100 $600 At least 200% but less than 300% $22,980 $34,470 $750 $47,100 $70,650 $1,500 At least 300% but less than 400% $34,470 $45,960 $1,250 $70,650 $94,200 $2, % and $45,960 and $94,200 and Full amount Full amount above higher higher Individual Shared Responsibility Payment Almost all people who can afford it, will be required to have health insurance. If they don t they will be assessed an Individual Shared Responsibility Payment. Individual Shared Responsibility Payments will be calculated on a monthly basis. If you are subject to the penalty only for one month it is 1/12 of the amounts listed on the next slide. 8

9 Individual Shared Responsibility Payment Greater of: Flat Dollar Amount Percentage of Income 2014 ADULT: $95 CHILD: ½ of $95 CAP: $285 1% of applicable income (Applicable income = income above the filing threshold) 2015 ADULT: $325 CHILD: ½ of $325 CAP: $ & beyond ADULT: $695 CHILD: ½ of $695 CAP: $2,085 2% of applicable income 2.5% of applicable income NCTC and Center on Budget and Policy Priorities, Affordable Care Act (ACA) Series : Preparing for Fall Insurance Enrollment and the 2014 Tax Season August 8, Exemptions from Penalties Specific exemptions from penalties are allowed but most require a certification process. Some will be certified through the marketplace, some through the tax return and some through both. Most can be applied for during the calendar year or when you file a tax return. A few must be applied for PROSPECTIVELY. Marketplace Exemptions Religious conscience Indian Tribe Membership Hardship Insurance unaffordable based on projected income (must show that marketplace determined insurance was unaffordable) Hardship Difficulty paying bills Incarceration Health care sharing ministry 9

10 Tax Filing Exemptions Indian Tribe Membership Hardship Insurance unaffordable based on actual income Undocumented resident Short coverage gap of less than 90 Days Incarceration Health care sharing ministry Individuals whose income is so low that that are not required to file a return are automatically exempted from these penalties. LITCs are funded by the IRS. The IRS does not endorse our services and using us doesn t get you special favors with them. We don t generally prepare tax returns. We provide free legal advice and representation ti regarding Federal and related State and Local Taxes. We have income and citizenship eligibility guidelines. About Low Income Taxpayer Clinics This is a complex law with many new requirements for tax payers. Some issues we anticipate seeing in our clinic include: Eligibility for penalty exemptions; Audits when two people claim the same child; Questions about how to file tax returns; Issues with reconcilliation. What concerns do you have??? Anticipated Issues 10

11 A Low-Income Taxpayer Clinic may be able help when: The IRS owes taxpayer money and they haven t received it. The IRS says taxpayer owes them and taxpayer disagrees. The IRS says taxpayer owes them and taxpayer agrees but can t pay. Taxpayer is a victim of identity theft. Taxpayer has a financial hardship situation and the IRS is going to take their refund. Taxpayer has received a notice from the IRS. LITCs Help When: Audits Delayed Refunds Petitions to Tax Court Audit Reconsideration Injured Spouse Innocent Spouse In hardship circumstances, we can assist with some past due returns (otherwise we will refer to a free tax prep site.) THE IRS OWES TAXPAYER Ohio Akron Community Legal Aid Services English (866) Ohio Cleveland Friendship Foundation of American Vietnamese, Inc. Cambodian/Lao/Spanish/Vietnamese (216) Ohio Cleveland The Legal Aid Society of Cleveland English (216) Ohio Columbus The Legal Aid Society of Columbus English/Spanish (866) Ohio Columbus Ohio State Legal Services Association English/Spanish (740) Ohio Painesville Lake Erie College English (440) Ohio Toledo Advocates for Basic Legal Equity, Inc. English/Spanish (888) OHIO LITCs 11

12 1. The Legal Aid Society of Greater Cincinnati and Legal Aid Society of Southwest Ohio 2. Advocates for Basic Legal Equality and Legal Aid of Western Ohio 3. The Legal Aid Society of Cleveland 4. Community Legal Aid Services and Northeast Ohio Legal Services 5. Southeastern Ohio Legal Services 6. The Legal Aid Society of Columbus Legal Services in Ohio LAWOHIO ( ) Affordable Care Act ndthebasics.org/ Tax Issues d.org advocate.irs.gov/indi viduals Helpful Resources Megan Sullivan The Legal Aid Society of Columbus General Intake for The Legal Aid Society of Columbus Contact Information 12